Wednesday, August 22, 2007

Water infrastructure failing to attract investment Unlike other infrastructure areas, private investors have shown little interest in putting funds into the water industry as economic uncertainties make the sector a less attractive prospect. This was the view of multinational Siemens when its representatives spoke at last week's gathering of industry experts in Stockholm for World Water Week.

Johannes Schmidt, board member of Siemens Financial Services, said water consumption needed to be managed more efficiently and waste water treatment had to be expanded globally to guarantee supply and support economic growth. "The market is growing strongly," said Mr Schmidt.

"[But] open questions and uncertainties about financing water treatment technology are blocking efforts to raise private capital." Compared with projects in energy distribution, transport and healthcare infrastructure, water projects are seen as the risky, low-return option in the current environment, he said.

"Equity models in the water area are always associated with high risks," said Mr Schmidt. The problem could be traced back to four issues, he added.

The first is an issue of uncertainty due to a lack of long-range planning, whilst the second is the unfavourable risk-return profile when compared with projects such as building roads, hospitals or energy infrastructure.

The third is the unpredictability of political and social conditions which is closely linked to the final problem - legal uncertainty. In a nutshell, investors fear that a state is more likely to take control of a privately-owned water supply, as water is a basic necessity, than it is to nationalise the electricity supply or health service.

Water projects are a huge growth area, says Siemens, as the demand for water continues to increase as populations rise and industry expands. But despite the growing need, few investors are eager to back them and this will continue to be an issue until the core problems are addressed, argues the company.

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