By solving many of its problems domestically and thereby gathering much valuable know-how, Austria has developed into an export leader in environmental technologies within only two decades. With a recent annual growth rate of 12 % (including sales and exports) and an export quota of 65 %, the environmental sector was held up as one of industry’s great white hopes.
An important milestone of success was the Initiative for Export of Austrian Environmental Technologies jointly launched by the Ministry of Environment (BMLFUW) and the Federal Economic Chamber (WKÖ) in 2005. Austria’s league of mostly small- and medium-sized eco-technology businesses earned global repute for their renewable energy use, air emission control and waste management, but also for their water management expertise.
Their strengths lay in water conditioning, plant operation, revitalisation and flood early warning systems. Southeast Europe became a major export market. But what is the situation like today – in times of crisis? Like any other business sector depending on sound credit policies, the export-oriented domestic infrastructure sector became rather unsettled by the global bank crash and the widespread economic crisis that was to follow.
After several weeks of worry and anxiety, one of the leading global events, Wasser Berlin (31 March – 3 April), eventually cleared the air and allowed a preliminary assessment of the current situation, at least for the first half-year of 2009.
WASSER BERLIN: Indicator of the crisis
As organiser Messe Berlin GmbH reports, this year’s event attracted even more exhibitors (704 vs. 630 in 2006), extended the exhibition space to 49,000 m2 and hit another visitor record (34,583). 22 percent were foreign visitors, which reflects the growing globalisation.
The conference sessions attracted 6,967 attendees (as opposed to 5,498 in 2006). Christian Göke, CEO of Messe Berlin GmbH, comments: “Considering that many companies are issuing travel restrictions for business trips by employees, Wasser Berlin 2009 must be seen as a huge success! All key parameters of Wasser Berlin have increased and we are confident that the new two-year interval schedule and our next event in summer 2011 are broadly accepted. The 14th Wasser Berlin in June 2011 will be held in conjunction with the International No-Dig Show.”
Göke’s opinion by and large coincides with that of Austrian exhibitors and visitors. Hans Sailer, head of the Vienna Waterworks, believes that the traditional medium-term pre-bookings may have been a blessing in disguise. They gave Wasser Berlin the go-ahead even before the economic downturn. Karl Rohrhofer from the “austrian water” cluster praised the wide range of topics, but was less pleased with the decentralised organisation of the conference.
“Today organisations tend to operate individually, and so the central and interdisciplinary topics are often neglected,” he complained. All questioned experts agreed, however, that the mid-term “acid test” to prove water management’s resistance to the crisis was the new two-year interval of Wasser Berlin and the next IFAT in Munich.
Is the effect of crisis delayed?
Could it be that the economic crisis has not yet reached water management? And what is the situation like in Austria’s favourite export markets in Southeast Europe? With respect to urban water management in Western and Central Europe, Hans Sailer does not expect a worsening of the crisis in the medium term: “Both public and private water utilities are continuing to invest in rehabilitation measures and water service fees will remain at current price level.”
Unfortunately, the relevant countries in Southeast Europe did not respond to direct inquiries by aqua press regarding their current situation. According to the head of the Vienna Waterworks, a possible increase in water service fees will mostly hit private users. He points out that in the wake of communication campaigns e.g. by the Austrian Development Agency and domestic consulting firms, public acceptance of higher water service fees and payment behaviour improved.
Examples where higher service fees have helped to cover the cost include Albania (Shkodra), Bulgaria (Sofia) or Serbia (Belgrade). Hans Sailer says: “In case of a full-blown, persistent crisis, this development might be reversed. One reason is that the governments in these countries are unlikely to provide the financial backing needed to support the population.”
He expects that most of the problems will center around the wastewater sector. While projects in this area are substantially funded by the EU, countries still have to contribute to the cost. As a result, especially states with serious credit problems like Hungary will be facing a financial plight. It also needs to be considered that people in crisis have other priorities than eco-friendly sewage treatment.
Max Hammerer also expects a slump in investments after 18 years of steadily growing prosperity. Hammerer, a reputed expert of water management in Southeast Europe, supports Hans Sailer’s point but also highlights the vital role of industrial and commercial employers in water consumption: “If those large revenues decrease as well, the supply and disposal industry will suffer a double loss,” he says, concerned about the looming problems for local and international suppliers.
There is no “storm on the horizon” to date as most of the infrastructure projects backed by EU funding (co-finance included) have been settled. The former head of ADWC expects no major financial cuts for the current year; but like all other experts questioned, he is reluctant to draw a forecast for 2010.
Due to their structural properties, regional water managements have long been “sanctuaries” spared from repercussions; this makes them even more vulnerable to the current crisis. Max Hammerer explains that some water utilities have already instituted counter-measures, but these mostly consist in freezing investments and reducing staff.
While the curb on investment primarily affects the rehabilitation and renewal of distribution systems, wells, tanks etc. and the resizing of large supply networks, there is one key aspect not yet taken into account: the investments needed for implementing the EU Water Framework Directive, which has been adopted by all EU member states but also by some non-EU countries in Southeast Europe. The costly restoration of run-down sewer systems and the construction fehof modern sewage plants is also part of the bigger picture.
Situation varies greatly across markets
The Czech Republic and Hungary are good examples to show that the situation not only varies greatly within the different areas of water management, but also across individual countries and regional districts. Energie AG Wasser, for example, holds an interest in five water utilities in the Czech Republic. While in two regional districts water consumption by industrial users has decreased dramatically, it still remains constant in others.
The water use in private households has not yet changed. CEO Christian Hasenleithner is not happy about the shrinking revenues, but expects no major problems in 2009 due to the company’s flexible contracts. What becomes more noticeable in times of crisis is EU bureaucracy, such as in connection with the granting of funds or the frequent changes of formal requirements regarding public-private partnerships in recent years.
Like Hans Sailer, Hasenleithner criticises the lack of financial support by banks and credit institutions, which causes problems with equity contribution: “In combination with the currently high interest rates in excess of 5 %, this has already led to project delays and thus to higher construction costs. What aggravates the situation is the lack of long-term financing options on the market. But maturity matching is essential for water management investments!
One could say the EU-funded portion has decreased in value while the community’s equity contribution has increased, which takes us full circle to the high bank interest. If the crisis persists, the downward spiral will continue.” So far the economic crisis has affected only few sectors in the Czech Republic; much of this is owed to private consumption and people’s satisfactory payment behaviour. Although Energie AG Wasser’s Hungarian division provides other water-related services, such as water loss analysis and distribution system services, Hasenleithner tries to draw a comparison.
The situation in Hungary, he says, is pretty mixed. While business is still going well, the current lack of liquidity and the political situation hamper investments. Moreover, there are legal hurdles, such as the still pending water conservation law, the lack of regulations regarding private-sector involvement in water services, and the lack of rules governing the transparency of costs and water/wastewater service fees.
Hasenleithner demands clear and uniform EU regulations, such as in connection with the Cohesion Fund, and more legal safety for private service providers. Energie AG Wasser’s in-house crisis management strategy includes the streamlining and consolidation of its Czech operations as well as sourcing projects, such as in the IT sector. Hasenleithner expects that the crisis will lead to a decline in the number of private companies and will also provide opportunities for the development of more economically efficient water supply units (ideally 400,000 p.e.).
On behalf of the domestic suppliers, Karl Aigner (CEO of Pipelife Austria) and Wolfgang Lux (CEO of Poloplast) identify cross-sectoral variations also within Austria. The situation in the privately financed building sector is much worse than in the construction and civil engineering sector that benefits from financial compensation; but the latter is traditionally affected by winter conditions and their long-term impact on the spring season.
Aigner says: “What we need is a sustainable funding scheme through the now stateowned Kommunalkredit, which in Austria is responsible for community-level projects.” As many of Pipelife’s products are manufactured by affiliates in other countries, the company does not benefit from the newly announced export initiatives. Yet Karl Aigner is slightly optimistic about Pipelife’s business operation in Austria.
Wolfgang Lux expects that the crisis will be bottoming out in the second half of 2009 and proceed at low level well into the first half of 2010; then comes the turnabout with modest growth. “Every cloud of crisis has a silver lining,” he says. For Poloplast this means intensified working towards a healthy balance between sales and cost development, EBT, liquidity, investment strategies, and productivity.
Ulrike Rabmer-Koller, Vice-President of the Upper Austrian Economic Chamber and chief executive of a reputed supplier of no-dig technology, is also optimistic. Like Austria’s Environment Minister Niki Berlakovich (also read the next pages), she believes that Austria’s export opportunities still lie in Southeast Europe. Some regions even launch their investments ahead of schedule, she says, and Austrian companies could benefit from this development.
Especially so if they work together in teams and stop making each other’s life difficult. The Austrian Economic Chamber has founded a network for international projects to improve coordination. Similar goals are pursued by the Austrian Clean Technology Center of Excellence, which was established in 2008 to expedite the Master Plan Environmental Technology.
(Source: aqua press Int. 2/2009, Mag. Christof Hahn)