The industry is struggling to recover from severe drought conditions.
Melbourne, Australia (PRWEB) April 17, 2014
The Water Supply industry is tasked with supplying high-quality water to end users. IBISWorld industry analyst Caroline Finch states “the industry is in a state of flux as it emerges from one of the most severe droughts in Australia's history with significant new water supply assets and declining demand for its product from end users.” Decisions made during the height of the drought to construct desalination plants in several states have resulted in substantial capital charges that will be borne by consumers and businesses for many years. A number of desalination plants have been placed on stand-by, including newly constructed facilities, and may lie idle for several years. Over the past five years, revenue in the Water Supply industry has grown strongly, at an estimated compound annual rate of 6.5%. This has occurred against a backdrop of declining water use, as demand management strategies and investment in water efficiency have reduced demand for water from major markets. Hence, the rise in revenue stems from increased charges for water. Government owners of industry assets have increased charges to recover the cost of capital expenditure in the industry over the past decade, and build funds to cover the next round of upgrades. In 2013-14, the industry is expected to grow by 5.8% to $9.5 billion.
Internally, the structure of the industry has changed, with increasing centralisation and corporatisation of water supply participants. According to Finch, “while the Water Supply industry is dominated by state government-owned corporations, public-private funding mechanisms are becoming more commonplace for large infrastructure developments, including major water treatment plants and desalination facilities.” The next five years will be challenging for the industry, given the ongoing erratic rainfall conditions. An increase in charges allowed by regulators is designed to be ahead of cost increases. The industry's growing profitability will allow industry participants to make provisions for capital spending programs.
The Water Supply industry has a low level of market share concentration. Nonetheless, concentration is high within each state. A small number of government-owned organisations account for the bulk of industry operations. The fixed nature of water supply infrastructure gives rise to natural monopoly characteristics within individual supply areas. This has led to regulation of industry pricing. Concentration is expected to have remained stable over the past five years. The industry’s major players include the WA Water Corporation, Sydney Water Corporation, South Australian Water Corporation, Melbourne Water Corporation and Queensland Urban Utilities. For more information, visit IBISWorld’s Water Supply report in Australia industry page.
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IBISWorld industry Report Key Topics
Firms in this industry catch, store, purify and supply water, usually via a system of pipes. Firms that operate irrigation systems supplying water to farms are also included in the industry, but the on-farm operation of irrigation systems is included in the agricultural services sector.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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