2. 1 Market Analysis & Strategic Outlook for Real-time Automation & Controls (RTAC) in the North American Water/Wastewater Utility Marketplace PRESENTED BY Mike Marullo, Director-Strategic Market R&D InfoNetrix LLC PRESENTED BY Mike Marullo, Director-Strategic Market R&D InfoNetrix LLC

3. 2 Todays Presentation Topics Marketplace Characteristics Market Horizons Research Principal Market Factors Future Market Perspectives Supplier Dynamics Marketplace Characteristics Market Horizons Research Principal Market Factors Future Market Perspectives Supplier Dynamics

4. 3 Marketplace Characteristics

5. 4 Water Treatment Plant Booster Pumps Sewage Treatment Post Treatment Storage Water Pipes Sewer Pipes Reservoir Ground Water Wells River Source Treatment Distribution Sewer/Treatment Discharge Courtesy of Sandia National Laboratories, Albuquerque, NM WWMS Infrastructure Model

6. 5 Marketplace Characteristics Water/Wastewater Marketplace Approximately 170,000 U.S. public water systems* Plus: Municipal wastewater systems (thousands) Large utilities (serving 100,000 people or more) spend the majority of $$$ annually Smaller utilities reluctant to spend due to severe financial constraints (*SOURCE: USEPA) Water/Wastewater Marketplace Approximately 170,000 U.S. public water systems* Plus: Municipal wastewater systems (thousands) Large utilities (serving 100,000 people or more) spend the majority of $$$ annually Smaller utilities reluctant to spend due to severe financial constraints (*SOURCE: USEPA)

7. 6 Marketplace Characteristics WATER SYSTEM TYPENO. OF SITESPOP. SERVED (Mil) CWS: Community water system; year round operation 54,064263.9 NTNCWS: Non-transient, non- community water system (buildings, factories, etc.); 6 months/year 19,7386.9 TNCWS: Transient, non- community water system (campgrounds, gas stations, etc.); short durations 93,21012.9

8. 7 Marketplace Characteristics POPULATION SIZE CWS Utilities (by Population Served) SOURCE: USEPA OVER 3,300 CWS SERVING POPULATIONS OF 10K+

9. 8 Marketplace Characteristics Water/Wastewater Management Solutions (WWMS) REAL-TIME AUTOMATION & CONTROLS (RTAC) WC&T WS&D WC&T WS&D WC&T WS&D SCADA PAS FDD SCADA-Supervisory Control & Data Acquisition PAS-Process Automation Systems FDD-Field Data Devices WS&D-Water Supply & Distribution WC&T- Wastewater Collection & Treatment SCADA-Supervisory Control & Data Acquisition PAS-Process Automation Systems FDD-Field Data Devices WS&D-Water Supply & Distribution WC&T- Wastewater Collection & Treatment RTAC Forecasting & Analysis Model

10. 9 Marketplace Characteristics RTAC Market Composition SCADA: Supervisory Control And Data Acquisition Water Supply & Distribution Automation Wastewater Lift Station Monitoring PAS: Process Automation Solutions Water Purification Plant Automation Wastewater Treatment Plant Automation FDD: Field Data Devices RTUs & RTU-like Data Acquisition & Control Devices DCS nodes and Intelligent Electronic Devices (IEDs) for applications above (e.g., PLCs, etc.) RTAC Market Composition SCADA: Supervisory Control And Data Acquisition Water Supply & Distribution Automation Wastewater Lift Station Monitoring PAS: Process Automation Solutions Water Purification Plant Automation Wastewater Treatment Plant Automation FDD: Field Data Devices RTUs & RTU-like Data Acquisition & Control Devices DCS nodes and Intelligent Electronic Devices (IEDs) for applications above (e.g., PLCs, etc.)

11. 10 Market Horizons Research Strategic Market Research

12. 11 Market Horizons Research Come on! It cant go wrong every time... Market forecasting should NOT be a hit-or-miss proposition!

13. 12 Market Horizons Research Market Research Timeline & Report Schedule JUN 01: Finalize Research Plan & Forecasting Model JUN 15: Start Primary & Secondary Research (AWWA Conf) AUG 15: Begin Research Compilation & Analysis SEP 30: Develop Key Findings & Market Forecasts (Draft Rpt) OCT 15: Final Report Documents NOV 15: Report posted to InfoNetrix website for client access Market Research Timeline & Report Schedule JUN 01: Finalize Research Plan & Forecasting Model JUN 15: Start Primary & Secondary Research (AWWA Conf) AUG 15: Begin Research Compilation & Analysis SEP 30: Develop Key Findings & Market Forecasts (Draft Rpt) OCT 15: Final Report Documents NOV 15: Report posted to InfoNetrix website for client access

14. 13 Market Horizons Research Avoid the R.F.A. Approach! R eady… F ire! … A im?

15. 14 Market Horizons Research Some Uses for Strategic Market Research Decisions on new business, market or application initiatives Foundation for launching new products or services Expanding or otherwise changing your geographical presence Planning & executing mergers, acquisitions or divestitures Diversification into new markets or business areas Learn wants, needs & expectations of your market (or new ones) Develop realistic penetration & market share analyses Understand market changes & how you will be affected/respond Identify required resources and critical success factors Some Uses for Strategic Market Research Decisions on new business, market or application initiatives Foundation for launching new products or services Expanding or otherwise changing your geographical presence Planning & executing mergers, acquisitions or divestitures Diversification into new markets or business areas Learn wants, needs & expectations of your market (or new ones) Develop realistic penetration & market share analyses Understand market changes & how you will be affected/respond Identify required resources and critical success factors

16. 15 Market Horizons Research Market Horizons Research Template Market: North American (US & Canada) Water/Wastewater Utilities Focus: Water/Wastewater Management Solutions (WWMS) Scope: Real-time Automation and Controls (RTAC) Coverage: SCADA; PAS; FDD Related Apps: GIS; AMR Financial: Bookings (NOT Billings or Shipments); Constant 2002 USD Period: Base Year 2002; Forecasts 2003-2007; Calendar Year Basis (January-December) Forecast: 2003-2007 (Calendar Year Basis) Confidentiality: No information individually disclosed to third-parties Market Horizons Research Template Market: North American (US & Canada) Water/Wastewater Utilities Focus: Water/Wastewater Management Solutions (WWMS) Scope: Real-time Automation and Controls (RTAC) Coverage: SCADA; PAS; FDD Related Apps: GIS; AMR Financial: Bookings (NOT Billings or Shipments); Constant 2002 USD Period: Base Year 2002; Forecasts 2003-2007; Calendar Year Basis (January-December) Forecast: 2003-2007 (Calendar Year Basis) Confidentiality: No information individually disclosed to third-parties

17. 16 Market Horizons Research Market Research Plan Primary Research (25-30 Interviews) Suppliers Consultants TPPs (Third-party Participants) Secondary Research Business Horizons Utility Surveys (1,000 annually) Public & Proprietary Databases On-line Resources (Web/Internet/Intranets) Professional Associations, Meetings, Conferences & Symposia Industry Trade Press & Publications Users & Other Market Participants Market Research Plan Primary Research (25-30 Interviews) Suppliers Consultants TPPs (Third-party Participants) Secondary Research Business Horizons Utility Surveys (1,000 annually) Public & Proprietary Databases On-line Resources (Web/Internet/Intranets) Professional Associations, Meetings, Conferences & Symposia Industry Trade Press & Publications Users & Other Market Participants

18. 17 Market Horizons Research WWMS-RTAC Report Contents 1: Executive Summary 2: Marketplace Characteristics 3: Market Drivers, Issues & Trends 4: Market Size & Growth Outlook 5: Supplier Environment Appendices WWMS-RTAC Report Contents 1: Executive Summary 2: Marketplace Characteristics 3: Market Drivers, Issues & Trends 4: Market Size & Growth Outlook 5: Supplier Environment Appendices

19. 18 Principal Market Factors Market Drivers, Issues & Trends

20. 19 Principal Market Factors The 7 SIGNS OF MARKET EVOLUTION 1: Regulatory Policy & Governance 2: Economics & Investment 3: Technology, Standardization & Integration 4: Data Integrity & System Security 5: Web & Wireless Solutions 6: Enterprise Asset Management (EAM) 7: Customer Care & Satisfaction The 7 SIGNS OF MARKET EVOLUTION 1: Regulatory Policy & Governance 2: Economics & Investment 3: Technology, Standardization & Integration 4: Data Integrity & System Security 5: Web & Wireless Solutions 6: Enterprise Asset Management (EAM) 7: Customer Care & Satisfaction

21. 20 1. Regulatory Policy & Governance Role of regulatory bodies, local/state/national government and other authorities in how the market is shaped and evolved by these pervasive external forces of Market Evolution

22. 21 2. Economics & Investment How this market is viewed from a business and financial perspective by current and prospective participants including suppliers, consultants and the utility business community at large of Market Evolution

23. 22 3. Technology, Integration & Standardization Impact of technological advancements; system and application integration tools and methods; and evolving standards affecting the market in both short- and long-term of Market Evolution

24. 23 4. System Integrity & Data Security Explores current and emerging concerns about new challenges stemming from various factors: Web vulnerability Wireless Connectivity Corporate I/T networks for real-time use Information accessibility by non- operations personnel Corporate I/T network prioritization and preferences of Market Evolution

25. 24 5. Web & Wireless Solutions The Web is the future, but: Major security issues to be overcome Ongoing skepticism about reliability Control via the Web? Wireless goals must (& will) be won! Security risks can offset benefits Potential driver for projects New bandwidth being made available ~5GHz (802.11a usage) Increasingly broader, deeper data access and distribution demands of Market Evolution

26. 25 6. Enterprise Asset Management Ongoing evaluations of how real-time data moves from the field onto the business desktop and into the boardroom as businesses strive to: Do more with less Estimate complex asset values Preserve & optimize asset investments Turn asset investments into critical success factors of Market Evolution

27. 26 7. Customer Satisfaction & Service Market forces drive improvements and investments… NOT technology!! OMS - Becoming the Killer App PBR - Gaining ground New CIS upgrades will require a multi-level focus incorporating: AMR PAS EAM GIS SCADA Etc. Mobile workforce considerations of Market Evolution

28. 27 Future Market Perspectives Market Outlook (2003-07)

29. 28 Future Market Perspectives Post-9/11 General Economic Environment

30. 29 Future Market Perspectives General Market Trends Aging infrastructure driving up demand for solutions that are not: Capital-intensive Labor-intensive Environmentally disruptive Unnecessarily complex Smaller utilities are becoming more savvy, AND… Digital automation is more affordable each year! Result is a growing influx of smaller projects Strong price focus (often cash-strapped municipals) Preference for standardized approach (off-the-shelf mindset) Sparse use of consultants Hard to reach using traditional system sales methods General Market Trends Aging infrastructure driving up demand for solutions that are not: Capital-intensive Labor-intensive Environmentally disruptive Unnecessarily complex Smaller utilities are becoming more savvy, AND… Digital automation is more affordable each year! Result is a growing influx of smaller projects Strong price focus (often cash-strapped municipals) Preference for standardized approach (off-the-shelf mindset) Sparse use of consultants Hard to reach using traditional system sales methods

31. 30 Future Market Perspectives 80/20 Rules Of the ~54,000 U.S. Community Water Systems (CWS) about 3,700 serve 80% of the US population Well over 2/3 of the U.S.population drinks surface water, BUT… Almost 80% of the 54,000 CWS rely on groundwater 80/20 Rules Of the ~54,000 U.S. Community Water Systems (CWS) about 3,700 serve 80% of the US population Well over 2/3 of the U.S.population drinks surface water, BUT… Almost 80% of the 54,000 CWS rely on groundwater

32. 31 Future Market Perspectives ~$30M ~$60M ~$160M WWMS-RTAC Preliminary Market Estimates

33. 32 Supplier Dynamics

34. 33 Supplier Dynamics Supplier & Sales Channel Trends Fewer single-function suppliers; more cross- functional integration focus (SCADA/PAS/FDD) Suppliers must be able to address rapidly evolving Enterprise Asset Management (EAM) issues Some suppliers rethinking WWMS-RTAC; expect a more service-oriented approach Increased use of sales reps & distributors Increasingly standard field devices (commoditization) Growth of small utility component (MUNIs & RECs) Supplier & Sales Channel Trends Fewer single-function suppliers; more cross- functional integration focus (SCADA/PAS/FDD) Suppliers must be able to address rapidly evolving Enterprise Asset Management (EAM) issues Some suppliers rethinking WWMS-RTAC; expect a more service-oriented approach Increased use of sales reps & distributors Increasingly standard field devices (commoditization) Growth of small utility component (MUNIs & RECs)

35. 34 Summary (Q&A) A Summery Conclusion

36. 35 Market Analysis & Strategic Outlook for Real-time Automation & Controls (RTAC) in the North American Water/Wastewater Utility Marketplace Enjoy the AWWA Conference!

37. 36 How well you focus… …will determine your reality Albuquerque Atlanta Birmingham New Orleans Phoenix Pittsburgh Sacramento San Francisco San Jose Midlands (UK) N E W O R L E A N S & S A C R A M E N T O