Water Infrastructure: Development in the US

Water Infrastructure is one of the most important sectors in the United States. In this post, we analyse this sector, including the main companies and giving insight into the main challenges.


Water Infrastructure: A brief description

In order to have as clear a view as possible of the water sector in the United States, it is a good idea to analyze supply and demand separately.


Analyzing the supply of the water sector in the United States, it is observed that it is a market in continuous growth in recent years. In 2017 it grew 4.2% compared to the previous year, representing a size of 172,000 million dollars per year.
In general terms, two main business divisions can be identified. On the one hand, wastewater treatment services (representing around 61.5 billion dollars) and, on the other hand, supply services (corresponding to 59.2 billion dollars). Both services are assumed in the water bill and represent approximately 36%; 34.7% of the size of the sector, standing out, as well as the two main segments (ICEX, 2020).


Regarding demand in the country, growth is also observed, largely due to the increase in the population, whose growth rate is 0.6% per year. In this sense, it should be noted that the states corresponding to the South and West of the country represent a growth rate of 3% in the last 5 years. This population growth has as a consequence an increase in the need for new water infrastructures and, in the same way, for treatment equipment.

In accordance with this growth trend in recent years, the Environmental Protection Agency (EPA, 2018a; EPA, 2018b; EPA, 2016) estimates that an investment of around $ 472 billion will be required in the United States in drinking water infrastructure and some $ 271 billion of investment in wastewater infrastructure over the next 20 years.


Who bears the costs?

In the United States, it is the final consumers of the water who, indirectly, finance the equipment for water treatment through the payment of the water tariff, that is to say, invoice.

Analysis of the companies

In the water sector, in the United States, 15 main companies stand out: American Water Works (AWK), Aqua America (WTR), Pentair (PNR), American States Water (AWR), Watts Water Technologies (WTS), Itron (ITRI), California Water Service Group (CWT), SJW Group (SJW), Evoqua Water Technologies (AQUA), Badger Meter (BMI), Middlesex Water Co (MSEX), Connecticut Water Service (CTWS), York Water Co (YORW), Aqua Venture Holdings (WAAS) and, finally, Primo Water (PRMW).

AWK stands out among them, as it is one of the largest water companies in the US and is listed on the stock exchange. AWK supplies drinking water, in addition to handling wastewater and other related services in 46 states. It is one of the providers with the greatest geographic diversity in the country.

Entry barriers

To conclude with the analysis of the supply in this sector, it is crucial to mention the main difficulties in the market. Although licensing requirements or government regulations are generally lax, startups face barriers to entry that make it difficult for them to enter this sector.

One of the main obstacles encountered by new companies that want to compete in the sector is the large number of water systems that already exist in the American territory
Another of the biggest difficulties for potential competitors is operating and maintenance costs. In order to lower these management costs, as well as transport costs, it is recommended to have plants in multiple locations. This supposes in addition to a great investment, salaries of the personnel of the plants; costs, in many cases, difficult to assume for new companies.
Finally, it is important to mention that small companies lose competitiveness in the sector. Those larger companies will have an advantage when negotiating the prices of raw materials, in addition to being able to dedicate part of their resources to R&D, which allows them to distinguish their products from the rest and/or diversify their markets.

Is it a sector where PPP is actively developed?

When it comes to public-private partnerships, these are rare for water projects in the United States. However, it is estimated that these public-private partnerships are increasingly relevant in the country due to the need for financial restructuring of the states.

In this sense, it is worth noting the insufficient efforts of the public administration to raise funds. Despite the fact that in recent years there has been a rise in the water tariff, this collection has been deficient to finance new projects. An example would be the WIFIA program (Water Infrastructure Finance and Innovation Act), a program that was established with federal funds in 2014 and managed by the EPA, whose objective is to provide loans to local and state agencies, at low interest, in projects with regional impact.

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