3.

2 Consolidation and privatization such as France operate most of their waterworks through
Consolidation of the water industry opens up
opportunities for private service providers
The water industry is very fragmented and, over the last
few decades, has seen a flurry of privatization and con-
solidation, which is expected to continue. Up until 1994,
most private sector participation activity took place
within OECD countries. Since then, activity in developed
markets has eased and the emerging countries are tak-
ing over as the powerhouse behind privatization. For
instance in China, currently about 32% of the municipal
water market is served by the private sector compared to
only 4.4% in 1998.42
PPPs. Globally, local authorities are increasingly opting
for integrated solutions along the lines of PPP models.
In recent years, the number of people whose drinking
water and wastewater services are provided by private
companies has increased. Globally, about 14% of the
worlds population is served by private operators that
provide drinking water and wastewater treatment ser-
vices, and this figure is expected to rise to 21% by 2025.44
In Western Europe, 47% of the population is served by
the private sector, about 23% in North America and
20% in Southeast Asia.45 The strongest growth in private
sector participation is expected to come from emerging
market countries such as Egypt, Vietnam and India.

Globally, about 14% of the worlds population
is served by private operators that provide
drinking water and wastewater treatment
services.
The operating model and ownership structure of water
utilities also varies across regions. In most countries,
public authorities or state-owned organizations are
responsible for the drinking water supply and wastewa-
ter treatment while in some countries, these services
have been privatized or organized as public-private
partnership (PPPs). In the UK, privatization starting in
1989 has resulted in 10 large investor-owned water utili-
ties, representing more than 85% of the countrys total
systems.43 But in the US, only 16% of the water systems
are investor-owned and the vast majority is owned by
the local municipality or government. And some nations
The private sector is expected to play a significant role in
an integrated approach to water management, but it is
also important to improve transparency in the decision
making process. Although private companies can enable
efficiency gains and provide technological improve-
ments, privately-owned water utilities in many countries
still face skepticism for a number of reasons. For instance,
private utilities may be perceived to provide insufficient
protection of public interest by, for example, avoiding
making investments in beneficial long-term projects in
order to protect the short-term profits of their share-
holders. In addition, some governments may face chal-
lenges in regulating private monopolies. Nevertheless,
International organizations, such as the World Banks
Public-Private Infrastructure Advisory Facility (PPIAF),
offer comprehensive support in the preparation and defi-
nition of agreements with private operators in order to
avoid subsequent conflicts of interest.

42
 rivate Sector
P
Participation and
Performance of Urban
Water Utilities in the
Peoples Republic of
China, Dec 2010
43
S tandard & Poors rating
service, CreditWeek
Special report on water,
March 2012
44
 insent Masons Water
P
Yearbook 2012-2013
45
 insent Masons Water
P
Yearbook 2012-2013

22 RobecoSAM Water: the market of the future