Water - a cascade of opportunity
sustainability
Water is fundamental to the entire food and agribusiness (F&A) cyde and to the
well-being of people in their communities; without access to adequate supplies,
our clients' businesses would quickly dry up, taking the prosperity of the bank as
well. An awareness of our mutual dependence on water thus stands at the core
of what we do, and is the catalyst for a growing interest in the water sector both
at Rabobank International (Rl) and throughout the Rabobank Group as a whole.
Swelling industry
Getting on-board
Exercising caution
Flowing ahead
What'sNewS Issue 7 July 1999 I
C /^lean water supply, irrigation, waste
V_>water treatment, and water process
ing for food and other industries will all
represent profitable, high-growth markets
^>ver the next two decades, particularly as
populations and economies grow and the
demands on our finite water resources are
increased,' says Jean-Pierre Sweerts, man
ager of Rabobank's sustainable develop-
ments group. 'Carving out a substantial
role for ourselves as financiers in this field
is consistent not only with our business fo
cus, but also fits with our interest in sus
tainable patterns of economie develop-
ment and fundamental cooperative ethos.'
'Years ago, it became clear that an increas-
ing number of clients especially in the
F&A world were having problems with
water - either they didn't have enough or
they had too much or they had to invest in
expensive waste water treatment,' Sweerts
continues. 'Around the world we see
emerging water shortages, inadequate san-
station and wastewater treatment, and a
P>ressing need to ntake the most of avail-
able irrigation resources. There is already
a substantial overlap between our cliënt
base and a water sector which is com-
prised of water companies, water manage
ment boards, F&A industries and many
other players as well.'
Following the far-reaching global phe-
nomenon of energy and telecommunica-
tions liberalization, the water supply in
dustry has emerged as a new frontier. The
increasing pace of water privatizations on
the UK scene signals a trend applicable to
other EU member states - one that is be-
ing driven by the substantial investments
that will be required to meet anticipated
needs (the World Bank has estimated that
Iworldwide water sector investments will
rotal as much as USF) 700 billion by the
year 2005. On the European market, dur
ing the coming decade alone, annual in
vestments of USD 10-50 billion are fore-
cast). Privatization will be accompanied
by an acceleration in the number of merg-
ers and acquisitions as companies scale up
both domestically and cross-border, by the
formation of multi-utility conglomerates
combining water with telecom, energy,
transport, etc, and by a growing number
of strategie alliances.
These developments point to substantial
opportunities for Rabobank Nederland
affiliates including Interpolis, De Lage
Jean Pierre Sweerts
Landen, Robeco, and the local banks as
well as RI - where our knowledge and
relationship-intensive capabilities are
particular strengths. The overriding aim,
says Sweerts, is to coordinate our
resources Group-wide, to target lower-
risk, developed world clients specifically
in the EU, and Australia, and to profile
ourselves not merely as a source of credit
but as a centre of solution-based expertise
offering advisory, arranging and other
similar services. 'The inescapable
connection between water and our core
industries, combined with the fact that we
are the only global bank to specialize
specifically in these fields, opens a unique
opportunity for us to follow our clients
and establish a central profile in this
crucial growth market worldwide.'
According to agri-project finance team
(APFT) chief Niek Streefkerk, there is no
doubt that the provision of water both for
agricultural use and direct human con-
sumption is becoming an essential
business. Not only is it a growth market,
but it is also an increasingly sensitive
geopolitical issue as well. Moreover, since
water is generally still non-exportable, in
view of infrastructural limitations, and
water pricing structures are still insuffi-
ciently defined, there are considerable
currency exchange and other risks
associated with project financing in
emerging markets. Both Streefkerk and
Sweerts agree that these factors require a
careful choice of target markets and
specific clients, the capacity to combine
global coordination with local expertise,
and the development of a strong track
record and knowledge-base in a full range
of industry-specific solutions and services.
Great strides have already been made. For
example, RI's structured finance recently
finalized seven cross-border lease
arrangements for water treatment plants
owned by an equal number of Dutch
water boards. RI's project finance has
helped industrial clients and the AVeBe
potato cooperative develop major water
treatment facilities. APFT recently
finalized a deal involving water bottling in
Indonesia, and we are also part of a
consortia that are bidding on important
water supply and wastewater treatment
facilities in Europe. Interpolis is currently
developing innovative water/flood damage
policies while, on the local bank level,
May brought the conclusion of a major
NEG 60 million KUR 27.2 million) deal
for the Water Company of East Brabant -
one of many deals that have emerged
front our close ties with regional players
in the Dutch water market. Concludes
Sweerts, 'after establishing a clear long
term strategy, the key challenge is to
leverage our close cliënt relationships in a
coordinated and profitable manner on a
group-wide scale.'
