p9 (tisdale) private financing- the future of p3 in water...wastewater 44% stormwater 8% forecasted...

PRESENTATION GREENFIELD + WATER = BLUEFIELD

WATERFINANCECONFERENCE:DENVER,COLORADO

PrivateFinancing:TheFutureofP3inWater

30-31August2016

WaterFinanceConference:Denver,Colorado, 30-31August2016 ANALYST PRESENTATION

U.S. WATER INSIGHTS

Focus of Presentation

• Defining Bluefield Research

• US Municipal Utility Landscape

• Key Market Drivers for Investment

• Evolving Private Water Landscape

2


U.S. WATER INSIGHTS

Bluefield Research Focus

Bluefield’s insight services and reports are positioned to validate companies’ assumptions, address critical questions, and strengthen strategic planning processes as global water markets evolve.

• Companies approaching water as a business are often challenged by a lack of high quality, reliable information.

• Bluefield bridges this gap with actionable, data-backed analysis supported by a transparent research methodology and ongoing access to our global water experts.

• Interactive relationship between client and research team to work through critical assumptions and changing market conditions.

News & Events

Business Strategies

Technology Assessment

Research & Analysis

3


U.S. WATER INSIGHTS

Bluefield supports a diverse group global companies positioned across the water value chain, validating the quality and breadth of our insights.

We Serve Companies Across the Water Industry

Global Reach

Technology / EquipmentProviders

Engineering ProcurementConstruction

Firms

Water & Wastewater

UtilitiesIndustrial

Companies Infrastructure

InvestorsIndependent

Water Providers

4


U.S. WATER INSIGHTS

Very Small

27,039Small, 13,249

Medium4,828

Large3,761

Very Large418

Number of Water Systems by Size

49,295 Water

Systems-

20 40 60 80

100 120 140 160

Popu

latio

n Se

rved

, Mill

ions

Water System Sizes by Population Served

>25>10 to <25<1 to <101

Number of Very Large Systems by State

U.S. Water Network

Highly fragmented by 49,295 municipal water systems, 45% of the population is serviced by the 418 utilities serving over 100,000.

Source: EPA, Bluefield Research

5


U.S. WATER INSIGHTS

Sizing the Market – Municipal Water & Wastewater Outlook

Surpassing half a trillion dollars by 2025, the U.S. municipal water utility sector represents the single largest opportunity for water technology, equipment, engineering, and construction providers.

Water48%

Wastewater44%

Stormwater8%

Forecasted CAPEX, 2016-2025

US$532 Billion

Pipes51%

Plants29%

Other12%

Pumps6%

SmartWater2%

Total CAPEX Spend by Segment, 2016-2025

West25%

Southeast18%Atlantic

18%

Southwest14%

Midwest12%

South9%

Central2%

North1%

New England

1%

Total CAPEX by Region, 2016-2025

US$532 Billion

US$532 Billion

Source: Bluefield Research

6


U.S. WATER INSIGHTS

Projected Population Growth Heightens Pressure in Key States

• Three states, California, Texas and Florida, are forecasted to increase by more than 37% on top current 63 million people.

• Scaling populations to drive new supply infrastructure spend–reuse, desalination, and water transfer– and need for innovation

• High water usage and growth rates signal opportunities for smart water and efficiency-driven investment.

Population growth anticipated to place additional pressure on utility infrastructure, demanding greenfield capacity additions to keep pace.

Source: EPA, USGS, U.S. Census Bureau, Bluefield Research

State Population Growth vs. Water Usage per Capita

Nevada

IdahoUtah

Hawaii

Wyoming

District of Columbia

ArizonaTexasNebraska

California

OregonLouisiana

WashingtonWest

Virginia

FloridaGeorgiaNorth

Dakota Connecticut

North Carolina

DelawareWisconsin

40

60

80

100

120

140

160

180

200

-30 20 70 120

Dom

estic

Wat

er U

se (g

allo

ns / d

ay

/ per

son)

Urban Population Growth Percent, 2010-2030

7


U.S. WATER INSIGHTS

Pipe Infrastructure Getting Older

• Approximately 50% of U.S. infrastructure evaluated as poor to beyond planned life.

• The EPA estimates that 4,000 to 5,000 miles of water mains are replaced annually, which is expected to peak around 2035 at 16,000 to 20,000 miles.

• The national average for water losses in major U.S. cities ranges between 10% and 15% annually and below cities like Detroit and Philadelphia's approximate 30% levels.

Aging water infrastructure in the Northeast and Midwest underpin the regions’ higher rehabilitation costs going forward.

Source: AWWA, EPA, Bluefield Research

0

10

20

30

40

50

60

1970 1980 1990 2000 2010 2020 2030 2040 2050

Aver

age

Age

of P

ipes

Average Age of Pipe Infrastructure by Decade

8

PRIVATE WATER INSIGHT SERVICE


Declining Federal Funds Give Way to Localities

0

20

40

60

80

100

120

140

US$

Billi

ons

Federal State and Local

• Public spending—spending by federal, state, and local governments—on water infrastructure totaled $108 billion in 2014.

• Over the last reported decade–2004-2014– public spending on water CAPEX totaled US$455 billion.

• Another US$761 billion was spent on O&M.

• The lion’s share of government spending, totaling 95%, is generated from state and local governments.

Public Spending for Water Utilities, Federal vs. State Funding, 1956-2014

Federal funding for water utilities peaked in 1976 at US$16.9 billion and has since fallen to US$4.3 billion in 2014, requiring states and localities to shoulder the burden of water infrastructure.

Source: Congressional Budget Office, Bluefield Research

9

PRIVATE WATER INSIGHT SERVICE


0

5

10

15

20

25

30

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

U.S.

Mun

icip

al B

ond

Mar

kets

, Tra

ding

Vol

ume,

US$

Bi

llion

Municipal Bond Market ActivitySteady headwinds for municipal bond markets pose long-term risks to utilities as infrastructure costs escalate.

Source: SIFMA, Bluefield Research

• Over the next decade, utilities will be forced, in many cases, to address their respective infrastructure gap, including US$176 billion of network upgrades.

• The combination of bond rate returns and rising CAPEX demands will increasingly squeeze municipalities to identify new, more innovative solutions

• Unforeseen water system volatility including supply disruptions (e.g. drought), infrastructure shortcomings (e.g. non-revenue water), are placing municipalities credit ratings at risk.

Municipal Bond Market Trends, 1996-2015

10


U.S. WATER INSIGHTS

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

Sea

ttle

San

Fra

ncis

coP

ortla

ndS

an D

iego

Los

Ang

eles

San

Jos

eO

akda

leO

akla

ndR

iver

side

Long

Bea

chFr

esno

Atla

nta

Law

renc

eville

Ral

eigh

Cha

rlotte

Jack

sonv

illeM

arie

ttaM

iam

iTa

mpa

Aus

tinH

oust

onP

hoen

ixD

alla

sFo

rt W

orth

San

Ant

onio

El P

aso

Den

ver

Alb

uque

rque

Las

Veg

asR

ichm

ond

Was

hing

ton

DC

Laur

elB

altim

ore

New

Yor

k C

ityP

hila

delp

hia

Fairf

axC

leve

land

Det

roit

Indi

anap

olis

Col

umbu

sC

hica

goM

ilwau

kee

Okl

ahom

aLo

uisv

illeM

emph

isH

onol

ulu

Bos

ton

Min

neap

olis

Om

aha

US$

per

m3

Wastewater Price Water Price

City Pricing Index for Water & Wastewater, 2016

Municipal water infrastructure, including services and equipment for outsourced O&M contracts is primarily financed locally through the rate base, and the revenues that underpin bond issuance.

West Southeast Southwest Atlantic Midwest South

Paci

ficN

ew E

ngla

ndN

orth

Cen

tral

Source: Utilities, Bluefield Research

Price of Water & Wastewater by Volume, 2016

11


U.S. WATER INSIGHTS

Municipality Perspective: Drivers for Private Participation in WaterIn a highly public-controlled sector, municipalities’ move to incorporate private participation is based on a calibrated approach considering a spectrum of solutions to address specific financial and operational challenges.

Key Drivers

Financial Restructuring/Distress

Expansion/upgrade

Asset Management

Municipalities under financial stress seek to tap the private sector to improve debt position

Mounting capital improvement obligations for EPA compliance of aging infrastructure

Communities seeking to improve service quality tap into professionalized, large scale IOUs

Public Utility O&MContracts

ManagementContracts Lease BOOT

DBFO Concession Privatization

Predominate model in US water market

Model for public/private collaboration

Increasingly viable option for municipalities


12


U.S. WATER INSIGHTS

Private Players in the Water Value Chain

Wastewater Treatment

Privatization / Concession

PPP Concession

O&M Service Agreement

Sewage System

Core Water IOU Model

Water Value Chain Segment

Ongoing/Complementary business line

Evolving Model beyond O&M Agreements

Con

trac

ting

Mod

el

A well defined competitive landscape with a number of outsiders looking in for strategic opportunities.

DistributionWater Treatment

Water Production

IWP Model


13


U.S. WATER INSIGHTS

Investor Owned Utility PresenceThe sum of IOU M&A activity in the past 3.5 years totals almost 313,000 customers driven by large scale deals in 2015 and early 2016.

Large Scale IOUs >50,000 Served

American Water Works Company

40%

SUEZ20%

Aqua America7%

California Water Service Group

5%

Liberty Utilities (Algonquin)

5%

American States Water Company

4%

Southwest Water Company

4%

San Jose Water Company

3%

Utilities, Inc3%

<2% Each-Artesian Resources-York Water Company-Global Water Resources-Great Oaks Water Company-Del Oro Water Company-Johnson Utilities-Middlesex Water-Connecticut Water Co.-Sn Gabriel water Co.-Epcor Utilities-Aquarion Water Company


14


U.S. WATER INSIGHTS

Global companies across the value chain are developing strategies to capitalize on greenfield opportunities in water -- new build, new business models, and private investment. Bluefield Research supports a growing roster of companies across key technology segments and industry verticals addressing risks and opportunities in the new water landscape.

Companies are turning to Bluefield for in-depth, actionable intelligence into the water sector and the sector's impacts on key industries. The insights draw on primary research from the water, energy, power, mining, agriculture, financial sectors and their respective supply chains.

Bluefield works with key decision-makers at utilities, project development companies, independent water and power providers, EPC companies, technology suppliers, manufacturers, and investment firms, giving them tools to define and execute strategies.

WWW.BLUEFIELDRESEARCH.COM GREENFIELD + WATER = BLUEFIELD

Contact Bluefield Research

NORTH AMERICA192 South St // Suite 550Boston, MA 02111T +1 617 910 2540

EUROPECarrer de Sant Joan de la Salle 42Edifici Technova, 2.1208022 Barcelona, SpainT +34 93 681 4325

[email protected]

p9 (tisdale) private financing- the future of p3 in water...wastewater 44% stormwater 8% forecasted...

Documents