U.S. Water Equipment and Services Markets - Growth and Investment Opportunities

Research Overview

Growing Need for Investment in the Water Industry

Demand-supply disequilibrium is a significant challenge facing the U.S. water industry, and this underscores the importance for increased investment. Between 1992 and 2003, the overall spending on water grew by a mere 2 percent, proving that investments to meet the industry growth targets are long overdue. As per the Environment Protection Agency (EPA), an estimated $138 billion is required by 2016 to upgrade/replace the water infrastructure for compliance with the safety standards prescribed by the Safe Drinking Water Act (SDWA). There is also an urgent need to address concerns surrounding the sustainability of public water systems and security of the water facilities. Since water stocks prove to be safe investments even when markets are down, industry participants need to make a concerted effort to generate higher investments.

This Frost & Sullivan research provides an investment overview of the water equipment and services market in the United States. It provides a detailed financial analysis of various companies and up-to-date information regarding the latest mergers and acquisitions in the industry. The study also provides a detailed analysis of the municipal, industrial, and residential segments in the water industry.

Growing Public Awareness Regarding Water Quality and Regulatory Controls Drive the Market

The distribution of funds in the Drinking Water State Revolving Fund (DWSRF) program revealed that treatment represented the largest percentage of project costs (43 percent), followed by projects to address transmission and distribution needs (32 percent). "The law requires that states give priority to projects that are needed to protect public health and ensure compliance with the SDWA," says the analyst of the research. Deriving its demand from this trend, advanced water treatment methods such as reverse osmosis, ultra violet filtration, and ozone treatment have gained considerable market attention in recent years.

Another key trend seen in the industry is the growing importance of contract services/outsourcing for the operation and maintenance of water and wastewater treatment facilities. As the demand for investment for expansion or upgrade of water infrastructure increases, service providers have emerged as a vital source of funding for water utilities.

Entry of Larger Companies Brings about Consolidation in the Water Industry

With the recent entry of several large participants such as GE, Siemens AG, Suez Lyonnaise des Eaux, and RWE Thames Water among others, a lot of consolidation activity has been taking place in the industry. Siemens AG recently purchased the systems and services businesses of USFilter Corporation from Veolia Environment, making it the largest water services company in the United States. "Such mergers and acquisitions in the U.S. water industry are bound to bring in the required funds for recent investment/expansion projects as the bigger participants jostle for market share," observes the analyst.

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