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Jim Stratton

Water utilities are companies that provide water and/or wastewater services.

Currently there are more than 50,000 municipal water systems in the U.S., most of which are run by public agencies. But the trend for local governments to sell their water utilities to private firms may be gaining strength, again, as cash-strapped governments try to raise money for other obligations, such as pension funds.

The new privatization trend should create good growth opportunities for companies that manage municipal water and wastewater systems.

Note that there are other ways to invest in the water industry other than water utilities as described here. See below.

On the up side

• Water utilities enjoy local monopolies
• The need for water is an absolute need

Business risks

• Water conservation cuts into revenues because most contracts are tied to water consumption
• Water use is weather dependent
• Water utilities are highly regulated
• The use of water rises and falls with the business cycle
• The infrastructure is aging and increasingly prone to failure
• There is some resistance to water utility privatization and some privatization failures (see “Faulty Pipes” report at The Water Infrastructure Network http://www.win-water.org/reports/ )

Related Companies

In rank order by market capitalization:

Aqua America (WTR)

California Water Service Group Holding (CWT)

American States Water Company (AWR)

SJW (SJW)

Cascal NV (HOO)

Southwest Water Company (SWWC)

Middlesex Water Company (MSEX)

Conn Water Services (CTWS)

Foreign water utilities, such as SABESP (SBS) may also be of interest.

Other water plays

Companies involved in the global water industry, including:

• Water rights
• Pump and filter manufacturers
• Irrigation equipment manufacturers
• Bottled water distribution
• Water filtration and sanitation
• Flow technology
• Construction companies that specialize in water infrastructure

And other companies that specialize in water-related solutions