US water on stream for greater privatisation

The deterioration of public water infrastructure in the US and a decline of federal funding is prompting a shift towards greater private participation in the sector, a study finds.

With 19 privatisation deals either completed or pending in the first half of 2016, private investment in the US water sector is expected to gather steam, according to Boston-based Bluefield Research.

“The market shift comes amidst a growing water infrastructure investment gap exceeding $532 billion over the next decade,” the firm said in a report.

Bluefield Research estimates that federal funding for municipal water systems has declined in the past 40 years to barely four percent, leaving municipalities to foot the bill for necessary upgrades.

“Municipalities are approaching a breaking point as utility assets reach the end of their useful lives,” said Keith Hays, vice-president of Bluefield Research. “They must now seek out alternative solutions for funding and technical expertise.”

This shift has already begun, according to the firm, thanks to a more attractive regulatory framework in key states, such as New Jersey, California and Pennsylvania. However, Bluefield Research has also found increased M&A activity in Illinois, North Carolina and Virginia.

“Many of the hurdles to private participation, including public pushback, asset bankability and debt financing, remain,” Hays said. “However, the broader, national focus on infrastructure upgrades is opening the door to more private participation.”

Private investment represents only 15 percent of the 49,000 water systems in the country, according to the report.