Further rate increases and continued M&A activity will support revenue growth.
New York, NY (PRWEB) May 30, 2014
The Water Supply and Irrigation Systems industry's performance has grown at a steady rate during the past five years. Revenue is expected to increase at an average rate during the period. Despite the recession, demand for water remained high, as droughts and other dry weather conditions created greater need for the industry's services. While water sales volumes grew, industry players passed on increased rates for water supply to customers. Each state's public utility commission (PUC) regulates water supply pricing, and industry players must file rate cases with their respective PUC to raise rates charged to customers. PUCs grant rate increases based on water volume growth and capital upgrades undertaken by industry firms. Many appeals for rate increases were approved in the past five years because of a rise in the volume of water consumption. These rate increases are expected to continue, and industry revenue is anticipated to grow in 2014.
Private operators have gained market share in the industry through a flurry of merger and acquisition (M&A) activity. During the recession, according to IBISWorld Industry Analyst Antal Neville “many public entities had trouble raising revenue from taxes and bonds, and they were unable to invest in operations that needed upgrading.” Private firms stepped in to acquire these struggling operators and expanded their stake in the industry by upgrading aging assets for a profit. “These firms filed rate increase applications to their respective PUCs, and the rates continued to be granted due to the ongoing upgrades,” says Neville.
Concentration in the Water Supply and Irrigation Systems industry is low. The next five years are expected to yield similar results to the past five. M&A activity will remain a major component of the industry, as private firms seek to expand their interests and raise profit margins. While firms will acquire nearby struggling operations to benefit from economies of scale, they will also expand by adding on new customers. Firms that purchase struggling companies will invest in making water-supply assets more efficient, which will likely lead to further rate increases for the industry. However, aging infrastructure that needs to be replaced could force players to reinvest earning, potentially hampering profit margins. As a result of these trends, revenue is anticipated to rise at an average annually in the five years to 2019.
For more information, visit IBISWorld’s Water Supply & Irrigation Systems in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in the Water Supply & Irrigation Systems industry operate water treatment plants or water-supply systems, which typically include pumping stations, aqueducts and distribution mains. Households are the largest market segment for industry firms. Additionally, local governments and municipalities operate most water-supply operations, however, a growing share of the industry is becoming privatized.
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