US private water markets are poised for significant growth, according to a new report from Bluefield Research. With an infrastructure investment gap of more than US$500B for drinking water and wastewater treatment over the next twenty years, a revised regulatory landscape is shaping new opportunities for private players looking to invest strategically in US water.
A major step forward for the market came on 10 June 2014 when President Obama signed the Water Resources Reform and Development Act (WRRDA) into federal law. WRRDA aims to alleviate investment gridlock, which has plagued US water infrastructure over the past 25 years. A series of private water-friendly proposals accompanies WRRDA, including the creation of a federal water authority, removal of caps on private water bonds, and guidelines for public- private partnership (PPP) legislation to support municipalities' financing upgrades and optimizing management of their water networks.
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Currently, private water suppliers operate in a hyper-fragmented US market that contains more than 100,000 systems. Privately-owned water supply networks serve 15 percent of the US population. This market structure has challenged companies to realize economies of scale and capture synergies across asset portfolios. However, Bluefield analyzes how a diverse set of strategies- ranging from greenfield development by independent water suppliers to pursuing the investor-owned utility (IOU) model through acquisitions- is helping companies enter and grow in the US.
VIDEO: Bluefield Research Tracks Key Trends in U.S. Private Water
"New legislation and M&A potential are piquing the interest of domestic and international players- particularly those seeking IOU plays," said Keith Hays, VP of Bluefield Research and lead analyst for U.S Private Water Market: Opportunities & Strategies, 2014. "Large scale IOUs have focused their portfolios in states with larger populations and policies favorable to private participation in municipal water, including California, Texas, New York, New Jersey, Pennsylvania and Florida. In addition, we've witnessed an increase in PPP interest on the part of municipalities in or near the service areas of existing large-scale IOUs."
SOURCE: Bluefield Research