LA utility tops US water bond risk says report
05 Nov 10 by desalination
A report published on 21 October 2010 by Ceres and Water Asset Management alleges that few participants in the US water and electricity bond market — including investors, bond rating agencies and the utilities themselves — are accounting for growing water scarcity, legal conflicts and other threats in their analyses.
Investment in water reuse is one of a number of recommendations.
Public water utilities deliver more than 80% of US water to residential and industrial consumers and issue billions of dollars’ worth of bonds each year to fund infrastructure. Public electric utilities also depend on ample freshwater to generate hydropower and to cool powerplant equipment. The stresses are especially severe in regions experiencing rapid population and economic growth, including the west, southwest and southeast.
The report, The Ripple Effect: Water Risk In The Municipal Bond Market, introduces an innovative quantitative model, developed by PwC (part of PricewaterhouseCoopers), to assess both water and electric utility water risk exposure by comparing their available supplies with projected water demand from 2011 to 2030. Drawing on public information gathered from federal reports, bond statements, and utility planning documents, the model generates a set of water risk scores that can be used by investors and credit rating agencies to better understand relative water risks among utility bonds.
By coupling the water risk scores with other financial information already available in credit rating opinions and bond documents, investors can gain a more complete picture of a bond’s total risk profile.
Using this tool, the report found the following risk situations:
The report makes the following recommendations for water utilities:
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