Business of blue : China’s water needs create opportunities for Canadian purification systems

 Stimulus plan fuels sales of advanced Canadian purification systems

By Hillary Brenhouse International Herald Tribune 27 October 2009 Montreal

The staggering economic growth in China has come at a heavy cost, paid in severe contamination of the country’s air, soil and water. But now the Chinese government is aggressively pursuing more stringent environmental regulation, with a particular focus on water distribution and wastewater treatment.

Recent stimulus spending has opened up the Chinese market to green initiatives. And Canadian companies are responding to the call for advanced water treatment and reuse technology. “It’s not well known that China has set aside more money for the adoption of clean technologies than any other country on the planet,” said Dallas Kachan, managing director of Cleantech Group in San Francisco, which tracks global investment in clean technologies.

The Chinese economic stimulus package of 4 trillion yuan, or $585 billion, announced a year ago, focused nearly 40 percent of its spending on environmental and energy-efficient projects. The climate change meeting in Copenhagen in December is likely to prompt policy shifts that further drive the market for clean technologies in China, Mr. Kachan said.

 This is possibly the best time to be doing business in China as a clean-tech company.

“It’s important to get in now and form relationships.” Since 2006, the clean technology market in China has “gone from niche to mainstream,” and it is growing at an annual rate of more than 20 percent, according to Tsing Capital, one of the country’s first clean-technology venture capital firms.

Canada has a strong track record for innovation and investment in clean water technology and already has a foot in the Chinese market. “Canadian companies like Zenon Environmental that are world leaders in ultraviolet technology have benefited a lot of the emerging companies looking to enter China,” said David Henderson, managing director of XPV Capital, a Toronto-based investor in emerging water industry companies.

Alan McMillan is managing director of Omazo Ventures, a technology incubator firm also based in Toronto, and chairman of BX Jishu, a Chinese clean-technology distributor. Omazo, through BX Jishu, distributes in China equipment manufactured by UV Pure Technologies, also of Toronto, that purifies water using ultraviolet light.

This summer, Omazo struck a deal with a Shanghai-based hotel chain to supply 1,000 Chinese hotels with UV Pure’s purification units. Omazo declined to name the buyer but said that on average, each unit would cost $2,000 and hotels would typically need 2 to 10 units, depending on their size. Omazo is focused on the commercial property market – and specifically, on bringing clean water to China’s burgeoning hospitality industry. “That’s our penetration strategy,” Mr. McMillan said. “We see the hotel industry as being one of the first to demand clean water. Hotels have extreme water needs for their pools, restaurants, showers. And the people who stay in them have high expectations.”

The trade service division of the Chinese Ministry of Commerce recently announced a plan to build 10,000 green hotels by the year 2012 – hotels that will need to be outfitted with the latest in water treatment technology. In 2007, China raised its national standards for drinking water and established an inspection network to monitor water quality. The Health Ministry added 71 benchmarks to the 35 already required under previous standards.

But water sources are still considered unreliable, and boiling water in hotels for drinking continues to be the norm. UV Pure specializes in systems for institutions like hotels, schools and hospitals. Conventional ultraviolet systems tend to foul up when treating water in China because of high mineral content, and typically require costly water softeners. UV Pure’s technology features a self-cleaning mechanism, which according to the manufacturer allows it to operate effectively even in exceptionally hard water.

 “There’s no question that opportunities abound for clean-tech companies in China,” said Rick VanSant, UV Pure’s chief executive. “The Canadian government has done an excellent job in pursuing an improved relationship with China. And Canada has been a relative hotbed for the development of leading environmental technologies, particularly with respect to water disinfection and wastewater treatment technology.” Trojan Technologies, a company based in London, Ontario, which was acquired five years ago by Danaher, a diversified U.S. engineering company, is another that has sold ultraviolet disinfection technology to China – in its case to hundreds of municipal wastewater treatment plants located mostly along the fast-developing coast. Sales have been helped by a revision in government regulations on wastewater disinfection – based partly on Trojan’s input – to allow ultraviolet treatment as an alternative to chlorination.

“The new regulation and the Chinese government’s most recent five-year plan, which identifies building infrastructure to collect sewage and treat it as one of its main priorities for first-tier cities, dovetailed to create a market opportunity,” said Marvin DeVries, Trojan’s chief executive. “It was an opportunity that we were, and still are, anxious to participate it in.” The company also supplies, through local Chinese distributors, ultraviolet water treatment systems in industrial markets and products designed to disinfect water in private homes. At present, its initiatives in China are moving forward much ahead of schedule.

 “In no other geography have we found stimulus funding translate into orders and deliveries as quickly as we have in China,” Mr. DeVries said. “As a Canadian company, we were never under any allusions that the Canadian market would be big enough for us,” he said. “Right from the outset we adopted an export mentality.”

But Trojan’s acquisition by Danaher in 2004 was a crucial factor helping its entry to China and similar markets, he added. Using Danaher’s existing sales organization in the country, Trojan was able to leverage its experience and infrastructure almost immediately.

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