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US pension funds plot water infrastructure fund to pay for upgrades

US politicians have heard that public sector pension funds are developing a water infrastructure fund to help finance an estimated £250bn upgrade of America’s water and wastewater networks.

M3 Capital Partners vice president Thaddeus Wilson told the Congress transportation and infrastructure committee that the fund would be initially used for Design, Build.,Finance and Operate (DBFO) contracts.

“M3 is currently forming a North American water infrastructure fund that we anticipate will be initially capitalised by a US public pension plan as the ‘cornerstone’ sponsor,” he said. “It is expected that the fund will focus primarily on offering an innovative Design-Build-Operate-Finance (DBOF) approach to municipal water infrastructure project delivery. We believe this approach offers a robust form of public-private partnership (PPP) to municipalities to capitalise their water infrastructure improvements, which may include the repair, upgrade or replacement of drinking water and wastewater treatment facilities and, in some cases, their related distribution and collection systems.”

“We believe M3’s fund will be an attractive partner for municipalities given the common need for long-term investments in critical Water Facilities,” Wilson concluded.

The committee hearing was prompted by concerns from US local governments that they will be unable to pay for upgrades mandated by state and federal environmental laws and regulations.

Studies by Environmental Protection Agency and the Congressional Budget Office show that the cost of meeting regulations for wastewater alone over the next 20 years could exceed $400bn (£250bn), a sum roughly twice the current level of investment by all levels of government. The needs for drinking water infrastructure drive this figure even higher.

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