Black & Veatch sees growing U.S. water system needs

Reuters News
Posted: Apr 11, 2012 7:14 PM

By Matt Daily

(Reuters) - Engineering and construction group Black & Veatch is looking for new investors to help U.S. towns find cash to fix their water supply systems, the head of the company said on Wednesday.

Many of those municipalities have seen their tax revenues shrink in recent years, forcing them to delay upgrades to aging water delivery and waste water systems, Len Rodman, the chief executive and chairman of the privately held company told Reuters in an interview.

"We've got probably a trillion dollar need out there," Rodman said.

The company, which also builds electricity projects, telecoms infrastructure and provides construction services to governments, had expected its water business to surge in the past few years, but found the economic downturn hurt the market.

"Energy, telecoms and (government) are all growing, but the water business is really pretty flat, not that the needs are not there. The needs are piling up," Rodman said.

Growing concerns about water security and regulatory pressure for improved water quality are pressuring cities and towns to improve the infrastructure.

But few politicians are willing to approve rate hikes on residents to pay for upgrades, he said, or to sell the utilities to private investors.

An estimated $200 billion in investor money could be available for the projects, he said, which would likely earn returns in the high single digits.

Black & Veatch is hoping to attract investments from pension funds and others to help pay for the work without taking ownership of the water utilities.

"We're working with some people to look at some other models that might provide assurance for the investors of this longer-term payment, but not necessarily have ownership of the asset," Rodman said.

(Reporting By Matt Daily; Editing by Leslie Gevirtz)