Private equity firms manoeuvre for positions in the U.S. water market


Since 2017, a heightened focus on water and wastewater infrastructure in the United States (U.S.) have been attracting industry outsiders, and private equity firms, such as Peoples Natural Gas, based in Pittsburgh, Pennsylvania, U.S., have been indicating an interest in expanding their roles in critical infrastructure in order to include water networks and distribution, and exploring how they can enter the industry.


The water industry continues evolving

As of 2017, 15 per cent of the 65,000 water and wastewater systems in the U.S. are owned and operated by players in the private sector, with those who have successfully entered the market managing to carve out positions for themselves in the vast water chain, ranging from water utility investment and ownership all the way to operations and maintenance (O&M) service.

But according to Bluefield Research, those who attempt to enter the market can only do so after overcoming numerous significant challenges. A number have failed, such as the failed acquisitions a number of Japanese trading houses have gone through. But infrastructure players who have established themselves, on the other hand, have the opportunity to bring desperately-needed capital and local brand recognition that help them surmount the various regulatory and public concerns regarding the private sector in an industry traditionally considered the domain of the public sector.


Different strategies taken to carve out positions in the water industry

Up till now, according to Bluefield Research, have mostly subscribed to utility ownership, the strategy reflecting their broader strategies used to secure stable returns while also putting themselves in a position where they can continue to tuck-in and acquire more companies.



Usually, by the time public water utilities finally turn to the private sector in order to ask for investment, they are frequently under notable operational and financial strain, and need significant investment in order to bring their assets up to operational standard.

But with water utilities in the U.S. expected to spend between US$50 billion and US$70 billion per year over the coming ten years, the opportunities that outsiders will get to enter the market is set to rise. But the main challenge now, however, is that investors in infrastructure have to accept the fact that the water sector does not offer returns on investment as high as other industries, and some municipalities are in the grip of inertia.


Source: Bluefield Research