Water Industry News

January 19, 2005

The U.S. Water Equipment and Services Industry in Dire Need of Increased Federal Spending

PALO ALTO, Calif.--(BUSINESS WIRE)--Jan. 19, 2005--Tapping the immense potential of the U.S. water industry requires concerted efforts to address the issues surrounding supply shortages. This cannot happen unless there is a significant increase in federal funding toward building and maintaining the water infrastructure.

New analysis from Frost & Sullivan, Water Equipment and Services: Growth and Investment Opportunities, reveals that revenue in this industry totaled $104.9 billion in 2003 and projects to reach $150 billion in 2010.

From 1992-2003, federal funding has remained more or less constant -- increasing by merely 2 percent -- of which, grants for water transportation and resources increased by only 3 percent and 1 percent, respectively.

"The infrastructure of the nation's 54,000 drinking water systems is aging rapidly," say Frost & Sullivan Research Analyst Kirti Timmanagoudar and Senior Industry Analyst Sunitha Mysore Gopal. "This is a clear call for the U.S. Government to increase spending on water so that growth targets for the industry can be met."

According to the Environmental Protection Agency (EPA), by 2016, approximately $138.00 billion is needed for investment on upgrading/replacing the water infrastructure to comply with the safety standards prescribed by the Safe Drinking Water Act (SDWA).

"It is important to direct the money in the right direction and structure programs in a manner that addresses the states' highest priority needs and ensures that the funds are available for future assistance," explains Sunitha Mysore Gopal.

For example, allotted grants from the Drinking Water State Revolving Fund (DWSRF) can be used for improving the technical, financial, and managerial capacity of water systems.

Projects that promote and protect public health must be prioritized to ensure compliance with the SDWA.

In fact, 43 percent of funds from the DWSRF go toward water treatment projects. In keeping with this trend, reverse osmosis, ultra violet filtration, ion exchange, membranes treatment, gravity filtration, and electro dialysis have gained considerable market attention in recent years.

Service providers have also emerged as a vital source of funding for water utilities. They provide valuable contract services for the operation and maintenance of water and wastewater treatment facilities.

Various other sources for generating funds are municipal private activity bonds, short-term municipal bonds, state revolving fund revenue bonds, user fees, grants, and loans.

The U.S. water industry is also witnessing a spate of mergers and acquisitions with the recent entry of several large participants such as GE, Siemens AG, Suez Lyonnaise des Eaux, and RWE Thames Water among others.

"While consolidation in the industry threatens the survival of smaller companies, it also brings in the required finances for the recent investment/expansion projects as the bigger participants jostle for market share," observes Kirti Timmagoudar.

In future, partnerships between public water systems and local, state, and federal governments are likely to play a key role in meeting drinking water infrastructure needs. This could ensure sustainability of public water systems and the security of facilities.