Water companies benefiting from shortages
Saturday, 11 August 2007
Leslie Crawford in Barcelona
Opportunities for water companies are booming around the world because of looming shortages and decades of underinvestment, a conference in Barcelona heard last April.
China, Saudi Arabia and Algeria, where water shortages have become acute, are placing billions of dollars of contracts out to tender to improve water supplies for their growing populations. The trend is expected to grow, as 40 per cent of the world's population will suffer water shortages by 2050, according to the United Nations Development Programme. Global warming is expected to exacerbate the problem.
China plans to tender water services for an additional 100 cities by 2010. "The government knows it has a water crisis that is holding back development," Jean Louis Chaussade, chief executive of Suez, a French utility, told the conference.
China last year announced a $125bn (€94bn, £63bn) investment programme to improve water treatment and recycling facilities after a chemical spill forced Harbin, in north-east China, to cut off water supplies to 3.8m people for five days in November 2005. China has already privatised water services for 155m people.
Investment in water treatment will allow Beijing to use recycled water to fill its swimming pools during the 2008 Olympic Games.
Saudi Arabia began privatising water services after shortages sparked riots last November in Jeddah. Loay Bin Ahmed al Musallam, the deputy water minister, said the first contract to manage water supplies for Riyadh would be awarded this year. By 2010, private companies would provide water for half the population, he added. Saudi Arabia plans to invest $37bn over five years to improve water pipelines. Leakages cost 1m cubic metres of water a day - the output of seven desalination plants - the minister said.
Even after putting contracts out to tender, governments still face politically sensitive decisions. In Saudi Arabia, for example, water tariffs are among the lowest in the world. Mr Mussalam said Saudis consumed twice as much water as Britons in spite of living in one of the driest parts of the globe. The government was introducing measures to encourage people to save water.
Algeria has introduced public-private partnerships to finance billions of dollars of desalination plants after suffering acute water shortages five years ago. "Western Algeria had running water only one day out of every 18 at the peak of the crisis, in 2002. The rationing also affected Algiers," Christopher Gasson, publisher of Global Water Intelligence said. "At that point, water became a political priority and the government is now investing heavily in desalination," he said.
Even in the US, the shortfall between actual investment and the industry's real needs is estimated to be $122bn for waste water treatment and $100bn for drinking water over the next 12 years, according to Michael Dean of the Environmental Protection Agency. "People take for granted clean, safe, inexpensive water, but the old ways of paying for water in the US no longer meet our needs," Mr Dean said.
Water services in the US are mainly owned by municipalities, which fiercely resist privatisation.
According to Mr Gasson, decades of underinvestment are catching up with the water industry. "Either tariffs or subsidies will have to rise. We are at an inflexion point. Investment now is unavoidable," he said.
David Lloyd Owen, a British consultant, estimated the investment shortfall for the global water industry at $1,200bn over the next 20 years. "The question is how to overcome political resistance to the involvement of the private sector," he said.
"The water industry is one of the most conservative in the world. By and large, it is still run by bureaucrats and engineers," Mr Owen said. "There is also a passionate and well organised lobby against privatisation."
He saw more room for the private sector as technology for desalination and recycling come to play an increasing role in the industry. Banks are also becoming more creative in matching the financing of capital outlays in the industry with the long lives of water treatment facilities.
Nevertheless, much of the industry will remain local. Most capital expenditure goes on replacing leaking pipes, Mr Owen said.
Opportunities for water companies are booming around the world because of looming shortages and decades of underinvestment, a conference in Barcelona heard last April.
China, Saudi Arabia and Algeria, where water shortages have become acute, are placing billions of dollars of contracts out to tender to improve water supplies for their growing populations. The trend is expected to grow, as 40 per cent of the world's population will suffer water shortages by 2050, according to the United Nations Development Programme. Global warming is expected to exacerbate the problem.
China plans to tender water services for an additional 100 cities by 2010. "The government knows it has a water crisis that is holding back development," Jean Louis Chaussade, chief executive of Suez, a French utility, told the conference.
China last year announced a $125bn (€94bn, £63bn) investment programme to improve water treatment and recycling facilities after a chemical spill forced Harbin, in north-east China, to cut off water supplies to 3.8m people for five days in November 2005. China has already privatised water services for 155m people.
Investment in water treatment will allow Beijing to use recycled water to fill its swimming pools during the 2008 Olympic Games.
Saudi Arabia began privatising water services after shortages sparked riots last November in Jeddah. Loay Bin Ahmed al Musallam, the deputy water minister, said the first contract to manage water supplies for Riyadh would be awarded this year. By 2010, private companies would provide water for half the population, he added. Saudi Arabia plans to invest $37bn over five years to improve water pipelines. Leakages cost 1m cubic metres of water a day - the output of seven desalination plants - the minister said.
Even after putting contracts out to tender, governments still face politically sensitive decisions. In Saudi Arabia, for example, water tariffs are among the lowest in the world. Mr Mussalam said Saudis consumed twice as much water as Britons in spite of living in one of the driest parts of the globe. The government was introducing measures to encourage people to save water.
Algeria has introduced public-private partnerships to finance billions of dollars of desalination plants after suffering acute water shortages five years ago. "Western Algeria had running water only one day out of every 18 at the peak of the crisis, in 2002. The rationing also affected Algiers," Christopher Gasson, publisher of Global Water Intelligence said. "At that point, water became a political priority and the government is now investing heavily in desalination," he said.
Even in the US, the shortfall between actual investment and the industry's real needs is estimated to be $122bn for waste water treatment and $100bn for drinking water over the next 12 years, according to Michael Dean of the Environmental Protection Agency. "People take for granted clean, safe, inexpensive water, but the old ways of paying for water in the US no longer meet our needs," Mr Dean said.
Water services in the US are mainly owned by municipalities, which fiercely resist privatisation.
According to Mr Gasson, decades of underinvestment are catching up with the water industry. "Either tariffs or subsidies will have to rise. We are at an inflexion point. Investment now is unavoidable," he said.
David Lloyd Owen, a British consultant, estimated the investment shortfall for the global water industry at $1,200bn over the next 20 years. "The question is how to overcome political resistance to the involvement of the private sector," he said.
"The water industry is one of the most conservative in the world. By and large, it is still run by bureaucrats and engineers," Mr Owen said. "There is also a passionate and well organised lobby against privatisation."
He saw more room for the private sector as technology for desalination and recycling come to play an increasing role in the industry. Banks are also becoming more creative in matching the financing of capital outlays in the industry with the long lives of water treatment facilities.
Nevertheless, much of the industry will remain local. Most capital expenditure goes on replacing leaking pipes, Mr Owen said.