Top Water Supply Investments
Neglected U.S. Water Systems Attract Private Sector Cash
Within 50 years, more than 80 countries including the United States will experience water shortages affecting over half the world's population.
Few people realize that the U.S. faces serious water quality, water contamination and water scarcity issues that require immediate attention.
According to the American Society of Civil Engineers, the world’s top industrialized country has some 55,000 water systems and 16,000 wastewater treatment facilities in need of repairs to the tune of over US$1 trillion by 2025.
Successful water supply management projects demand a rigorous analysis and redesign of existing water systems. Leading water industry experts like Aqua Terra Asset Management start with a focused and thorough problem statement. Only then does a seasoned team of water systems analysts determine which water companies are best able to implement, and profit from, solutions to water management problems.
American Water Systems Problems
Water pipe systems are expected to last an average of 100 years. Today, many American cities depend on water pipe systems that are more than a century old. The Environmental Protection Agency (EPA) has said that at least 25% of U.S. water pipes are "poor, very poor or elapsed"; Aqua Terra anticipates that percentage to increase 45% by 2020.
Three startling facts emerge from America’s eroding water infrastructure.
- Each day, the U.S. wastes an estimated 60 billion gallons of water from leaky pipes.
- In some cases, the leakage rate from deteriorating water pipes exceeds 25%.
- Corroded pipes facilitate water contamination when fuels, lead, bacteria and other illness-causing toxins invade the water supply.
Hot and dry south-western U.S. states already suffer from scarce water supplies. Selling, displacing or diverting water from more water-rich U.S. regions or Canada is not an option because water delivery is either prohibitively expensive or banned completely.
U.S. Water Systems Investments
Major repairs to water systems throughout the U.S. are considered the most feasible solution.
This approach requires major investments in the water infrastructures of all states. Over the next 20 years, Aqua Terra projects that an estimated US$500 billion must be spent to rehabilitate U.S. water systems just to meet minimum EPA requirements.
That type of money is not available from federal or municipal governments. Aqua Terra concludes that raising capital for a rebuild of America’s water infrastructure will be easier once the private sector gets more actively involved in operating U.S. water systems.
Currently, private investors own less than 20% of America’s 55,000 water systems. However, with rich American water utilities forced to spend more to ensure a continuous flow of water to their customers, America’s water industry offers compelling cashflows to private companies with expertise in water supply and water quality management.
Even more likely to profit from the rebuild of global water systems are a handful of portfolio funds that specialize in U.S. and international water sectors. Examples include Luxembourg’s Pictet Water Fund, the Claymore S&P Global Water ETF and Powershares Water Resources Portfolio.
Kinetic Asset Management’s proposed Water Infrastructure Fund is a new water systems mutual fund currently under review by the U.S. Securities and Exchange Commission (SEC). Aqua Terra’s team of water industry experts is set to manage that fund’s performance. The Water Infrastructure Fund is to invest in a diversified portfolio of American and foreign water companies ranging from water supply, water delivery, water quality and wastewater treatment firms to natural-resources companies with a specific water theme such as agriculture or hydroelectricity.
Sources for this Article
This article presents independent insights based on data drawn from Aqua Terra research and the June 18, 2007 Dow Jones Newswires' article ‘Kinetics Jumps Into Hot Water Sector’ by Daisy Maxey.
