Across the country, utilities are facing tough deci- sions about how to implement sorely-needed up- grades with declining capital resources.
The American Water Works Association (AWWA) predicts
that repairing the aging water and wastewater infrastructure
across the U.S. will cost $2 trillion over the next 25 years. And
with dwindling grants from federal sources, that leaves utilities and municipalities to pick up much of the tab.
In the past, utilities would have turned to the bond market
to raise capital for these projects, said John de Yonge, director of account enablement for the Global Cleantech Center
at Ernst & Young. But that’s no longer a viable choice. “The
fnancial crisis made everyone wary of taking on new debt,”
he said. “Even if it’s available, it’s not an attractive option.” So
what is a utility to do?
THE PPP ALTERNATIVE
It’s time to look outside of traditional funding models and
get more innovative, suggested Michael Deane, executive
director of the National Association of Water Companies
(NAWC) in Washington, D.C. “There is a lot of capital out
there, and utilities are a good investment.”
Many utilities are fnding solutions — and cash — in the
private sector through public private partnerships (PPPs).
PPPs are a lot more common outside of the U.S., but it’s a
viable way to introduce new sources of capital into the water
sector, de Yonge said.
Through PPPs, private sector developers
and investors provide
capital and perform
upgrades and maintenance in exchange for
temporary or permanent ownership of the
assets. “It provides a
lot of benefts to the
utility,” de Yonge said.
“They get money, upgraded systems and potentially lease
However, the lack of familiarity with these models can
make them a tough sell for utility leaders and government
agencies. “The main constraint is the perceived or real loss
of control over the asset,” he said. “The governance process
and the benefts to the public and the operator have to be
very clearly defned for these projects to be accepted.”
BAYONNE ELIMINATES ‘MOUNTAIN OF DEBT’
Bayonne, N.J., is one of the municipalities currently participating in a PPP with United Water, a private water and
wastewater service provider, and KKR, a global investment
frm, who created a joint venture for the project. The deal
gives the joint venture a 40-year lease to operate and maintain the water and wastewater system of the Bayonne Mu-
A Look at Innovative Funding
Solutions for Cash-Strapped Utilities
BY SARAH FISTER GALE
An infusion of capital helped BMUA pay off debt and will help finance the city’s multimillion-dollar capital improvement plan.
Bayonne Municipal Utilities Authority (BMUA) participates in a PPP with
United Water and KKR that gives
the joint venture a 40-year lease to
operate and maintain the water and
wastewater system in exchange for