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Financing Water and Wastewater Infrastructure
Frost & Sullivan, Aug 2009, Pages: 24
Poor Condition of the Global Water and Wastewater Infrastructure Paves the Way for Private Investment Opportunities
Water is a vital component of any economy and it is required by almost every industry to function. However, it is an expensive commodity to treat, distribute, and recycle. The increasing disparity of water availability across the world has made the cost of producing water economical in regions where it is plentiful and costly in arid regions where it is scarce. Water and wastewater infrastructure is a vital part of the global water system that requires a considerable amount of investment. At present, the condition of water infrastructure is deplorable even in the developed nations, such as the United States and the United Kingdom. Water and wastewater infrastructure is in dire need of development and investment, thereby opening up investment opportunities for private investors. “The water requirement in densely populated regions such as Asia Pacific is more than in others,” says the analyst of this research. “Therefore, there is likely to be an increased emphasis on the efficient management of water and wastewater facilities in these regions.”
The teeming population drives the water infrastructure upgrade in the Asia Pacific region, whereas in Middle East and Africa, it is influenced by the water scarcity as well as population growth. Therefore, water desalination assumes greater importance in Middle East and Africa. In contrast to all the aforementioned regions, the need for improvement of infrastructure in eastern Europe is governed by the European Union (EU) regulations that impose several stringent laws.
Greater Investments in Water and Wastewater Infrastructure to Help in Developing this Market
Financing for water and wastewater infrastructure is not devoid of problems and challenges. Thought leaders in this field developed a view a few years ago that lenders were beginning to classify water and wastewater infrastructure as the one that required low levels of investment and thus, it did not demand much financing. The development of this feeling among the lenders can be attributed to various reasons. “Most water utilities across the world, barring a few, struggle to generate sufficient revenues to maintain even the basic level of financial sustainability,” explains the analyst. “This is a major set back for investors wanting to penetrate this market.”
Making the most of the financing options available from all possible resources is a viable strategy to surpass the challenges. The investments need to be stepped up to at least twice of what it is at present. “Reform and innovation in financial architecture is the current need, which will result in a gradual change instead of an immediate paradigm shift,” concludes the analyst. “The various existing sources of finance should be blended well to achieve a synergy, avoid crowding out other sources, and maximizing the leverage on the total cash flows.”
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
Drinking water utilities
Chemicals
Wastewater utilities
Contract operations
Conveyance
Equipment manufacturing
Maintenance services
Instruments and testing
Engineering and construction
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