Trenchless Technology

JAN 2019

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authorizes the Water Infrastructure Finance and Innovation Act (WIFIA) at $50 million and the Drinking Wa- ter State Revolving Fund (DWSR) at ~$4.4 billion. These funds can be utilized for loans, loan guarantees, bond insurance, and project refinanc- ing . While this is certainly a positive development for the industry on its face, it remains a far cry from the in- flux of capital that organizations like the AWWA believe is needed—espe- cially considering the current admin- istration's expectation that local water utilities become self- sufficient over time as a result of increasing deregu- lation. Given the capital constraints faced by small municipal water utilities, select municipalities have become sellers to large, investor-owned or- ganizations looking to acquire their operations. The water industry is ripe for consolidation. To characterize the water utility space as highly-frag- mented is an understatement . There are over 50,000 community drinking water systems in the United States; compare that with 3,300 electric utili- ties. Large, private operators of scale are capable of making the capital in- vestment required to upgrade aging infrastructure and better- suited to maintain it , going forward. These in- vestor-owned companies are enticed by the attractive revenue streams from allowable usage rates (which are likely to increase as the costs to treat and distribute water become more trans- parent to the public) and are realiz- ing incremental margins through the implementation of a variety of system upgrades and service improvements (e.g ., asset resilience monitoring , on- line billing ). While acquisition as a so - lution is logical on its face, communi- ties have always been hesitant to give control of their drinking supply to a third party. Not only are these private buyers roll- ing up complementary facility and dis- tribution assets ( i.e., water and waste- water) to achieve economies of scale, but they are also evaluating industry- specific self-performing construction companies as acquisition targets. These capabilities enable them to handle in- frastructure expansion, rehabilitation, and maintenance in-house. Other rol- lups focused on providing industry- specific construction and engineering services may look to vertically integrate for the purpose of securing blanket con- tracts with large utilities and pursuing large, complex design-build projects. Nick Illuminati is an associate, and Dan Shumate is a director, at FMI Capital Advisors Inc., FMI Corporation's investment banking subsidiary. 1 US Census Bureau 2 Edison Electric Institute 3 Deloitte, Communications infrastructure upgrade 4 Cisco, Visual Networking Index Forecast 5 IBIS World 6 Deloitte, The aging water infrastructure: Out of sight, out of mind? 7 Id. 8 Id. 9 Id. 10 Water Finance and Management, The Outlook for Partnerships and Private Investment: Q&A with NAWC CEO W W W.T R E N C H L E S S T EC H N O LO GY.C O M 43 VIEW OUR TRENCHLESS TECHNOLOGY ARCHIVED WEBINARS! • N A S T T 's I n t r o d u c t i o n t o Tr e n c h l e s s Te c h n o l o g y – N e w I n s t a l l a t i o n We b i n a r S p o n s o re d b y : N A S T T • S p i ra l Wo u n d L i n e r s – L e a d i n g - Ed g e Te c h n o l o g y S p o n s o re d b y : S e k i s u i S P R A m e r i c a s • N A S T T 's I n t r o d u c t i o n t o Tr e n c h l e s s Te c h n o l o g y – Re h a b i l i t a t i o n We b i n a r S p o n s o re d b y : N A S T T • N e w S c i e n c e , Te c h n o l o g i e s , a n d R u l e s fo r E xe c u t i o n A d va n c e t h e C o u r s e fo r M u n i c i p a l G r o u t i n g S p o n s o re d b y : Ava n t i , L o g i b a l l a n d C U E S • H i g h T i m e fo r Wa te r t i g h t S o l u t i o n s S p o n s o re d b y : Tre l l e b o rg P i p e S e a l s • To p 1 0 M u s t A s k Q u e s t i o n s W h e n C h o o s i n g a P u m p S o l u t i o n s Pa r t n e r S p o n s o re d b y : S u n b e l t Re n ta l s View more on the website! www.trenchlesstechnology.com/webinar-archives C o s t : F R E E O r ga n i ze d b y : ® CEU credits are available for archived webinars, except those presented by NASTT.

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