Environmental Management News

Richard Collins
Wednesday, 14 January 2009

Black & Veatch Water CEO Dan McCarthy is upbeat about the Australian water sector, forecasting continued growth over the next 5-7 years despite tightening access to capital and a cautious public.

The multinational water company has been lifting its profile in Australia since re-entering the market in 2006 following the rush to build billion dollar desalination and recycling projects.

McCarthy predicts ongoing investment in this water scarcity infrastructure, albeit on a smaller scale and increasingly in regional areas, plus a suite of more routine projects that have been sidelined in the building boom.

“That is where I see the market, with those two issues – completing the water scarcity investment and the backlog of other routine capital improvements and rehabilitation projects,” he told Environmental Management News.

“The water market, at least from what I hear from the utility managers in leading positions in the country, is going to be a robust market for the next five to seven years.

“I think it is going to be a strong market for investment. Now, of course the economic outlook can change that, not from a [water] needs stand point but access to capital funds and an affordability perspective to citizens because of the stress they are under.”

McCarthy makes the pitch that investment in water and wastewater infrastructure would not only pump prime the economy, but catch up on historic under-spending globally.

There is some evidence to support the view, both locally and abroad. In December the Federal Government released guidelines governing the $1 billion National Urban Water and Desalination Plan to fund large-scale projects.

In the US, McCarthy says the US$850 billion stimulus package President-elect Barak Obama will put to Congress in February could include US$50-100 billion ($75-150 billion) for water projects.

“It is still uncertain how this will all shake out, and then there is the question of how much of [the money] will be grants and how much as zero low interest loans… to spring the utilities’ investment cycles going forward,” he said.

South Korea has just announced it will invest $US38 billion over the next four years in a series of eco-friendly projects to stimulate economic growth, including cleanup of the country’s four main rivers.

Japan too is developing a billion dollar stimulus package to expand the green business market, including zero-interest loans for environmentally-friendly companies and spending on infrastructure. It is unclear if water projects will be included in the program, to be unveiled in March.

McCarthy, who is currently touring Australia, expects local utilities to continue investing.

“It does not appear that projects are being deferred. Certainly they are being scaled back and being more frugal, because money is tight, so it has been about prioritising and making sure what they spend - when they spend it - is the right decision,” he said.