What happens when water meets money?
This is a question I have been pondering on reading that Thames Water senior creditors are proposing a £6.7Bn write off of existing debt, including ALL current shareholder equity. This would represent the largest financial loss to investors on a British Infrastructure asset in history. SMART Water & Waste World Magazine reported on this and it formed part of the BlueTech Analyst Alerts. The Thames story has unfolded like an Opera, dramatic and tragic.
My conclusion is that when private equity tries to control water, and extract value from it, this leads to perverse outcomes such as this. The idea of controlling the world’s water was the central plot in the James Bond Movie A Quantum of Solace, in which the Bond villain, with the help of a hapless sycophant, wants to create a monopoly for nefarious reasons. There are increasingly numerous examples where efforts to control water rights and water infrastructure are in tension with the fact that access to the worlds most widely traded commodity is a human right. Water Utilities have a natural monopoly. The Australian model, semi-state,is arguably the best or DB /DBO.
Peter Gleick, produced a seminal report on the topic and noted “Our assessment shows that rigorous, independent review of water privatization efforts are necessary to protect the public. Governments must establish clear guidelines that ensure fair access to water. Water is far too important to human health and the health of our natural world to be placed entirely in the private sector.”
By contrast, when private equity puts capital to efficient use to create value in solving water challenges, that’s a win-win. Through original thinking, innovation, partnerships and solving unsolved problems. For example WaterEquity uses Microfinance models to create scalable methods to increase access to water and sanitation, unlock non-consumption and create value.
Sciens Capital Management is helping to fill a funding gap for underfunded water utilities in the Mississippi Catchment to invest into water infrastructure. Note: investment into in-ground water infrastructure, as opposed to running water infrastructure in-to the ground.
The venture capital and private equity funds we support, are focused on value creation in water. Be it through creating new companies, bringing new solutions to market, financing projects, providing scale to have greater impact. Included in these ranks are XPV Water Partners, Burnt Island Ventures, Echo River Capital, SKion GmbH PureTerra Ventures, Emerald Technology Ventures. Imagination and creativity, a deep understanding of the area, and long term commitment are some of the common denominators here.
For those interested in these types of opportunities, BlueTech Research just published Part 1 of our Top 10 Areas of Opportunity for Value Creation in Water and our Unicorn Watch Service Report to track the next 10 potential breakthrough water technology innovations and opportunities.
