Rapidly Expanding Global Water Requirements

The worldwide water industry is experiencing revolutionary changes due to both demand factors, and the increasing scarcity of inexpensive supply alternatives. This is prompting unprecedented investment opportunities in infrastructure, resource development, efficiency, water quality/quantity monitoring, privatisation, industry consolidation and technological change.

In the developing world, more than 1 billion people lack access to a reliable and adequate water supply and to safe wastewater disposal systems. Addressing their needs requires hundreds of billions of dollars of investment by governments and private industry. The OECD estimates that by 2025 water will make up the lion’s share of global infrastructure investment with water spending topping $1 trillion that year. This amount is nearly triple the amounts needed for investments in electricity or transport. For developing countries alone, an estimated $103 billion per year is needed to finance water, sanitation, and wastewater treatment.

Fresh Water Scarcity

The United Nations estimates that by 2050 over two billion people in 48 countries will lack sufficient water. Over 70% of our Earth’s total surface is covered by water but although water seems abundant, the real issue is fresh water availability, since 97.5% of all water on Earth is salt water, leaving just 2.5% as fresh water. Nearly 70% of the available 2.5% fresh water is frozen in the icecaps of Antarctica and Greenland; the bulk of the remainder is present as soil moisture or lies in deep underground aquifers as groundwater not accessible to human use.

Only 1% of the world’s fresh water (that is just 0.007% of all the water on earth) is accessible for direct human use.

The water industry provides clients with attractive inflation linked pricing, monopolistic business models, sticky customers, high visibility cash flows, and long term contracted revenues. The very local aspect of water creates regionalised supply and demand imbalances not affected by global supply swings. As a non-substitutable resource, water’s relatively inelastic demand insulates it from economic cycles when compared to other most other commodities and investments. Water rates have demonstrated positive pricing power, historically increasing at a rate greater than inflation, largely driven by infrastructure upgrades and expansion.

Liberty House Capital Water Graph