Alternative models for funding water infrastructure

Australian Water Association

Tuesday, 21 February, 2017

A new report from the Australian Water Association (AWA) looks at the current issues surrounding water infrastructure funding and considers ways in which new funding models present serious business opportunities for investors.

AWA CEO Jonathan McKeown said it is going to be crucial for the sector to look at alternative ways to pay for water infrastructure projects if it is to meet Australia’s growing needs. He stated, “Unprecedented burdens on existing infrastructure caused by urbanisation, climate change and our booming population means current funding models have simply not been able to keep up.”

In the discussion paper ‘Alternative models for financing water infrastructure’, written with ANZ and law firm Allens, the association recognises increased synergies between our water infrastructure needs and the capacity of private sector finance. Utilities have been forced to increase their borrowings in recent years, with consequential impacts on their commercial performance and ability to take on additional debt.

“As the need to upgrade water infrastructure becomes increasingly apparent, so does the need to understand the funding implications and options,” said Katharine Tapley, head of Sustainable Finance, ANZ. “The models outlined in our report shed light on some of the viable alternatives available to the government, private sector and community alike.”

The discussion paper presents a number of financing models for water infrastructure projects, as well as case studies on how these models have been used already and their application to the water industry. The paper also identifies new opportunities for developments that can meet future needs.

“Alternative financing models that decrease the cost of capital to utilities, particularly in our regional and rural areas, can lead to more affordable projects and reduce costs on water users,” said McKeown. “It will also reduce pressure on the balance sheets of state governments. Most importantly, these alternative sources of finance will enable water infrastructure projects to proceed to meet the requirements of our expanding population.”

“Investors want surety and long-term vision,” added Kate Axup, a partner at Allens. “Innovative funding models such as those proposed in our report balance the needs of investors, governments and the community ensuring new, sustainable water infrastructure into the future.”

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