U.S. water industry survey shows expectations of significant consolidation over the next five years
WeiserMazars LLP, an accounting, tax and advisory services firm, announced the release of its first annual U.S. Water Industry Outlook survey. Participants were asked to predict the future of the industry over the next three to five years, and 71% of respondents expect significant consolidation in the next five years through acquisitions of smaller utilities by larger investor-owned utilities. Respondents also consistently stated that the fragmented structure of the industry had a negative impact on the quality of customer service and the ability to raise capital for infrastructure upgrades.
Consolidation of the U.S. water industry through privatization or semi-privatization has been anticipated for some time. However, negative public perception of water industry privatization has prevented this consolidation from taking place. Externalities are changing this attitude as access to financing becomes more challenging for municipalities and raising taxes becomes the only alternative, but an unpopular option. Many states are enacting public-private partnership legislation, paving the way for consolidation to take place.
“The water industry has attracted a lot of private capital during the past few years because of its stability relative to other investment opportunities,” said Jerome Devillers, head of water infrastructure/project financing. “Our study shows the time is ripe for consolidation to take place.”
The survey also confirmed other reports that the U.S. water infrastructure is critically aging, with 45% of respondents categorizing their facilities as old to very old, while none of the respondents indicated that their infrastructure was new. Recognizing the danger of a crumbling water infrastructure, 50% of public and private entities are increasing their capital expenditures by up to 5%. While respondents predict that capital spending for water delivery and wastewater treatment infrastructure will continue to increase until 2040, the needs versus capital spending gap is expected to grow at a faster rate.
Click on WeiserMazars’ 2012 U.S. Water Industry Outlook to see the survey in its entirety.