Although environmental business showed surprising resiliency in the U.S. last year, the going was rougher for U.S. firms working in international markets. Overall, the Top 200 reported $4.7 billion in environmental work outside the U.S. during 2001, a modest 4% gain above the total for the previous year.
Two years ago, more than half the Top 200 reported work outside the U.S.; now only 89 companies are in that category. Not surprisingly, the strong survive. The 11 firms at the top of the list are the same ones that were there last year. Together they account for 75% of total international environmental revenue.
As usual, Europe proved to be the most favored region, once again accounting for 41% of the work. Long Beach, Calif.-based EARTH TECH, which ranks third on the international list and reports 55% of its revenue from non-U.S. sources, continues to develop its European business. "The international water and wastewater market is good and strong," says Diane Creel, president and CEO. "Scotland, England and China are probably the three areas where there's a particularly strong push" for water and wastewater projects, she adds.
Scotland is in the midst of a $7-billion drinking and wastewater improvement program. Western continental Europe is "slow and it's down, but Eastern Europe is showing some growth for us right now," especially the Czech Republic, Hungary and Poland, Creel says.
San Francisco-based URS Corp. relies on non-U.S. work for only 10% of its total environmental portfolio, slightly less than last year. But that is enough to put the firm in ninth place on the list and things could improve, according to Jean-Yves Perez, the firm's Denver-based vice president of business development.
"For the first time in many years, the picture outside the U.S., particularly in Western Europe, is actually pretty rosy right now," says Perez. "We see a strong business and we do not see the pressure on prices we see in North America."
But overall, growth in European markets has been incremental, says Richard D. Fox, president of Cambridge, Mass.-based CDM, the parent company of No. 16 Camp Dresser & McKee Inc. "Activity in countries like Germany and England is flat or down," he says.
There are a few bright spots, especially in some of the European Union's smaller economies. "Ireland and Portugal are two areas that have been very good markets for the last several years," says Fox. He expects both to continue to perform well.
One reason U.S. firms might feel comfortable working in Europe and elsewhere is because "countries are catching up [to the U.S.] with regard to remediation and compliance," Perez says.
Another way firms can minimize risk working overseas is to work for a home-based client. "We see a number of U.S. government opportunities for environmental work on an international basis, primarily through the (Air Force Center for Environmental Excellence)," says David C. Rosenblum, senior vice president for energy, environment and systems business at CH2M Hill Cos. Ltd.
The Denver-based firm's share of non-U.S. business slipped from 15 to 11% last year. The company is trying to recoup lost ground by providing a full range of services at Air Force installations in Korea and Germany. Echoing Perez's observation about an improving business climate on the commercial side, Rosenblum says that "there appear to be more international regulatory drivers than there have been in the past, especially in Japan and Korea. New regulation is providing some new opportunities."
HOLD THE FORT BIG PLANS China is looking for outside help to improve its water and wastewater treatment. (Photo courtesy Montgomery Watson)
EASTERN STANDARDS. The most robust growth came from Asia, Australia and New Zealand, which together boosted their combined slice of the market to 24%, up from 21% for 2000. China's "huge commitment" to clean water and wastewater treatment presents extraordinary design-build-finance-operate opportunities, Creel says. In May, the Tianjin Water Works Group Co. awarded a $400-million contract to design, build, finance and operate Tianjin's Jie Yuan water treatment plant for 20 years.
Fox agrees that China's turnkey water and wastewater opportunities give it the most opportunity in Asia, by far. Other nations in the region, notably Thailand, Malaysia, and Singapore, "are fairly flat and they're flat at a pretty low level of activity," he says.
Waterford, Mass.-based ENSR International, which saw environmental revenue decline by 26% in 2001, is trying to recapture lost ground in part by overseas positioning. The company opened its first office in China last fall. The firm also likes the way the European market is moving and bought a 25% share of the UK's RSK Ltd.
EARTH TECH also made several key acquisitions in Australia, China, the Czech Republic, Germany and Sweden. Other additions within the last quarter include KAP, a Prague-based environmental engineering and consulting firm, and Bangkok-based Aquathai, which specializes in municipal and industrial water and wastewater treatment systems. The expansion will help the company serve the global market and provide a balanced portfolio of work in down times, Creel predicts.
Canada continues to gain ground as its economy becomes even more aligned with that of the U.S. in the post-NAFTA era. Market share grew to 14% last year, a point better than the previous year.
But Latin America remains stuck in low gear and continues to be an uncertain market, says Perez. Argentina's monetary problems will not go away. "Every ten years or so, you think you've finally found a market there, then it falls apart again. You can leave quite a bit of money on the table in Latin America," he says.
The region's fluctuating economy blocks development of infrastructure, Fox says. "The ability to sustain an economy that would finance [water and wastewater projects] is their great difficulty," he says.
The two biggest disappointments were in the smallest market sectorsthe Middle East and Africa. Africa's pitifully small share of the market could benefit from the aid package adopted by the G-8 countries, but that remains to be seen.
The Israeli-Palestinian conflict has "chilled a lot of things" in the Middle East, says Fox.
Prudent players are risk-averse these days, says Perez. In places where the market is soft, international clients often expect service providers to lower prices and assume added liability. But "more risk is not our business," he says.