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2015 U.S. Water Industry Outlook

By Brian Jones

The use of water is ingrained in all facets of the U.S. manufacturing and distribution sector – from utilities to food and beverage, consumer products, agriculture and more. “Businesses have operated for decades as if water resources were unlimited. The new paradigm, however, requires them to consider reduced local water supplies as a business risk,” says Jerome Devillers, Partner, Water and Project Finance at WeiserMazars. Difficulties with this crucial resource can have a significant impact on a business’s current and future operations and financial results.

Water issues have recently become more critical in the face of climate change as with the historic, ongoing drought in the state of California. Concern with the way to address these challenges is likewise growing as demonstrated in the higher response rate to the WeiserMazars 2015 U.S. Water Industry Outlook as compared to the initial 2012 survey. The larger number of respondents has given greater statistical depth to the results, providing an effective barometer for the industry. The trends identified will impact many sectors of the U.S. economy in the coming years. Going forward, we will continue to promote and build on the popularity of our survey to enhance the breadth of our database, in order to present the most accurate depiction of the water industry’s current status and future direction.

Respondents came from across the water industry, including private operators/managers of water systems, suppliers/support companies, municipal and local utilities, and federal & state regulators and financial institutions. Approximately half of the respondents were management/executive level and approximately one quarter were Chief Executive Officers, as shown below:

In both the 2012 and 2014 U.S. Water Industry Outlooks, recurring themes have been the challenges of aging infrastructure, regulatory compliance and staffing (talent attraction and retention). Additional key take aways from these surveys included:

  • The need to simplify the rate approval process.
  • Tariffs drove growth, with technical expertise and competitive pricing also being significant success factors.
  • Financing was readily available and accessible.
  • The top industry trends were privatizations, partnerships between the public and private sectors, and acquisitions.

In addition to the usual broad snapshot of the water industry’s current operational and financial status, the WeiserMazars 2015 U.S. Water Industry Outlook has a special focus on industry technology trends. We expanded to cover technology due to findings in the 2014 U.S. Water Industry Outlook, in which technical innovation was cited by many participants as the great untapped opportunity for the water industry, particularly in terms of the capacity of partnerships with the private sector to drive that innovation.

The 2015 U.S. Water Industry Outlook survey showed that the water industry is, in fact, developing an increasing focus on technology, with respondents indicating that the main drivers for investment in technology are the replacement of aging infrastructure, the reduction of operating costs, and compliance with regulation. Respondents also deemed technical innovation as the greatest opportunity in terms of value creation in the water sector.

The 2015 Outlook also dealt with enterprise risk management (“ERM”) – the process of determining the acceptable level of risk an entity is prepared to take on within its overall business strategy. Respondents were asked about the status of their company’s current ERM program, which showed that a common ERM consideration is aging infrastructure and its potential impact on operations if/when deterioration or failures occur.

Respondents also provided their views on current economic trends and their access to operational financing, as well as perceptions of political, regulatory, and long-term financing needs related to infrastructure investment. We found that companies are striving to take advantage of the positive economic outlook to invest wisely in technologies that can result in substantial improvements to various key performance measures.

Water is one of the most critical natural resources and its importance increases each year in the face of growing demand, climate change, and upheaval in the political and economic arenas. This dynamic environment will cause the industry to rethink their processes and systems as they move forward into the coming decades. Increased understanding and planning is required to ensure that key risks are managed effectively and sustainably.

Until the release of the 2015 survey you can review our prior surveys here.