By BrightWay Capital

04/20/2011 It is among the greatest challenges faced by mankind: more than a billion people around the world lack access to clean drinking water. By some estimates, more than half the world’s population may face “water stress” within the next 50 years.

The stakes could hardly be higher. Water is vital to human survival. But it enjoys no exemption from market forces. It is a commodity ruled by the laws of supply and demand. Traditional approaches of purely government funding supported by user fees, taxes and bond issues are no longer adequate. As long ago as 2003, The World Panel on Financing Water Infrastructure recognized the need to greatly increase the volume of finance available for water project finance. “We see it as an indispensable investment If humanity wants to achieve its other aims for health, universal primary education – above all of girls — and reducing absolute poverty.”


Chaired by a former Managing Director of the International Monetary Fund, the panel concluded that “water projects can be financed by combining public funds with private financing in transparent and acceptable ways.”

The years since have seen tremendous growth in such arrangements, including Public Private Partnerships (also known as PPPs or P3s). Between 2005 and 2010 KPMG International recorded 61 such transactions valued at almost USD MM 10,908. It called private financing in the water sector a “proven strategy” that unlocks many benefits, such as the ability to access additional sources of finance from banks and bond markets if water utilities are seen to have a sound, commercial approach.

At the same time, there is no escaping public accountability. Citizens continue to hold governments responsible for the quality of water service. The public and private partners must be equally committed to delivering long-term benefits to society as a whole.

Brighway Capital, of which I am Chief Investment Officer, partners with sovereign and sub-sovereign governments to develop and finance projects of strategic importance in alignment with local interests. Our PPP model is built on the assumption that local governments are usually in the best position to determine the needs and interests of local populations. We understand that the protection of local interests is of primary concern to our PPP partners, so our PPP model is often based on a partnership in which the government partner retains control and majority ownership.

You can read more about our approach on the Brightway Capital website at
http://www.brightwaycap.com/public_private_partnerships.php

-Faisal Qureshi
Chief Investment Officer,
Brightway Capital
www.brightwaycap.com