Feb. 11 (Bloomberg) — Investing in water utilities,
infrastructure and water rights offers stable, long-term
returns, Kyung-Ah Park, head of the environmental markets group
at Goldman Sachs Group Inc., said in an interview.
“Water’s an indispensable necessity, and supply is very
inelastic,” Park said in New York. Water infrastructure is a
way to invest in the megatrend, said the executive of a world in
which one in eight, or 884 million people, still lack access to
safe water supplies.
With demand for water growing twice as fast as a global
population expected to reach 8 billion by 2025, and much of the
developed world’s water infrastructure aging faster than it can
be replaced, municipalities constrained by the amount they can
charge customers need to seek alternative financing, she said.
Public-private partnerships where municipalities join with
private water operators in water and water-treatment
operations, some with incentives, are one model being used more,
particularly in the U.S.
Managing or buying aging municipal water systems presents
some of the best opportunities for private investors in water
infrastructure, said Matthew Diserio, president of Water Asset
Management LLC, a New York-based investment fund. Private
companies running municipal water supplies can wring
efficiencies from aging systems and offer investors returns as
high as 12 percent annually, Diserio said.
“The reason this business is so phenomenal is that water
rates go only in one direction –- up,” he said at the Feb. 8
conference sponsored by Goldman, General Electric Co. and the
World Resources Institute, a Washington-based group that works
to involve business in solving global environmental issues.
Water Bill
“You don’t get rich off rates, you get a decent return,”
Diserio said. Private operators are still regulated by
government-appointed commissions and need to invest a large
portion of their profit rebuilding aging systems, he said.
Representative Bill Pascrell, a New Jersey Democrat, said
he plans to reintroduce a bill to spur investment in U.S. water
infrastructure by removing the cap on Private Activity Bonds,
tax-exempt debt that state and local governments can issue to
fund private investment.
At least a fourth of U.S. water is lost to leaks from
treatment plants to the tap, and repairs would cost at least
$600 billion over the next 20 years even as state and federal
spending declines leave a funding gap of $220 billion, Pascrell
said.
“I think it’s a pretty good investment,” he said.
Economic risk is placed on the private entity, not on the
municipality. It’s a win-win.’’
To contact the reporter on this story:
Peter S. Green in New York at
psgreen@bloomberg.net
To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net
