NEW YORK — WeiserMazars LLP, an accounting, tax and advisory services firm, recently announced the release of its first annual U.S. Water Industry Outlook survey in which participants were asked to predict the future of the industry during the next three to five years. Seventy-one percent 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 the privatization of this essential public service has prevented this consolidation from taking place. Externalities are changing this attitude; as access to financing becomes more challenging for municipalities, 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 percent 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 percent of public and private entities are increasing their capital expenditures by up to 5 percent. 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.
Download complete survey results at www.weisermazars.com/images/WM%20WaterSurvey%202012.pdf.