Global water P3 market to triple by 2020

Boston — Many countries are facing a perfect storm of financing constraints and water infrastructure shortfalls. Dramatic declines in oil and commodity prices, low water tariffs, groundwater overdrafts, and untreated wastewater discharges are prompting governments to tap the private sector through public-private partnership (P3) schemes.

According to a new report from Bluefield Research, the market for water P3 projects is set to nearly triple between 2016 and 2020, adding an average of 16 million m³/day of treatment capacity annually versus approximately 6 million m³/day between 2010-2015. Total investment is expected to surpass US$58 billion, of which 80 percent will target new seawater desalination and wastewater treatment plants.

The global adoption of the water P3 model will come to the fore in the next five years through a combination of continued growth in markets where the model is well-established (China, Brazil), resurgence in markets that have stalled (Indonesia, Philippines, Mexico, Egypt), and new markets opening up (Persian Gulf countries, Vietnam, Peru, the United States).

"Particularly in emerging markets, led by China, municipalities are hard pressed to match the financial capacity and operational expertise that the private sector can provide," said Phuong Pham, Senior Analyst at Bluefield Research. "National governments aim to de-risk their water sectors for private investment with new P3 laws and more attractive contract tenders, while preserving long-term control over assets."

Water P3 Projects Planned by Country and Asset Type, 2016-2020. Source: Bluefield Research

An increasingly diverse group of private and semi-private firms are responding to new tender opportunities for P3 contracts. Bluefield's analysis of the portfolio strategies of the 50 largest global water players indicates that the water P3 market is in transition, with a cast of new players emerging.     

The global P3 market is led by integrated water players Veolia and Suez who have sustained their positions in recent years with over 19 million m³/day of capacity each, followed by semi-private local utilities (SABESP, COPASA), rapidly scaling Chinese players (BEWG, China Everbright), emerging utility concessionaires (Manila Water, AEGEA) and integrated water players (Aqualia).

"Many players turned their backs on P3 opportunities during the recent recession because of their capital intensity, while they deleveraged and reviewed their value chain positions overall," said Keith Hays, Vice President of Bluefield Research. "This market shakeout has left a field of players with clearer strategies to navigate continued macroeconomic uncertainty and address new opportunities."

Top 50 Global P3 Players, Capacity Under Management, 2015. Source: Bluefield Research

These and other insights are found in Bluefield's new report — Public-Private Partnerships in Water: Company Strategies & Market Opportunities, 2016-2020 — available at https://bluefieldresearch.com/public-private-partnerships-in-water-company-strategies-market-opportunities-2015-2020. This report is based on Bluefield's analysis of over 1,800 P3 projects in 44 countries, including top-down regional trends and bottom up company profiles, accompanied by a robust data appendix.