by James C. Lucas
A recurring theme we've noticed is the need to repair and build infrastructure is there, but it's uncertain as to who'll pay for it?
Blue gold” is a term thrown around a lot in recent years as interest in water as an investment vehicle has gained momentum. We've seen the price of oil get whipsawed in the past year, but unlike “black gold,” water doesn't have an open market in which it trades.
The drivers that attracted this interest in water haven't changed: population growth (at 1.89% a year, 1 billion people added every 15 years or so); urbanization (2007 was the first year more people lived in cities); people moving to where ample sources of freshwater are harder to find (i.e., California, Arizona and Florida); water scarcity (i.e., India and much of Africa); droughts (northern China and the Persian Gulf); and aging infrastructure (water leakage to sink holes). Regulation also plays an important role in driving demand for clean water.
There are no shortage of estimates of how much is needed to repair the aging infrastructure ($200 billion is on the conservative side) and adding infrastructure requires money as well. All one has to do is turn on a TV, pick up a newspaper (do they still have those?), or surf the ‘Net to read how banks aren't lending and that the current economic environment is the worst in generations. A recurring theme we've noticed is the need to repair and build infrastructure is there, but it's uncertain as to who'll pay for it?
Today, most U.S. water-related projects are paid for either through rate cases or bond issuance. We've seen an increase in privatization abroad, particularly in desalination projects, which generally carry large up-front costs. While “water” has been defined as a $400 billion global market, there are many players, none of which command a particularly large piece of the pie.