Innovative Water Infrastructure Financing Models for Public and Private Entities

Industries and municipalities that invest in infrastructure are making a generational commitment. The pipelines and treatment plants they build today will be operated for decades. These investments lay a foundation for communities to use their resources effectively, protect public health, and grow economically. However, traditional infrastructure financing requires considerable and sometimes insurmountable upfront capital. This financial barrier stalls indispensable infrastructure projects, leaving many industries and communities without opportunities to fund the infrastructure that would empower them to pay for it.

Identifying this roadblock to progress, BW Water offers novel funding models that help its customers finance necessary water and wastewater assets when the traditional funding route is unfeasible or unattractive. These flexible financing options put infrastructure investments within reach for public and private entities, relieving them of high upfront costs, facilitating project design, procurement, and operation, and alleviating the risks associated with constructing, operating, and owning these assets.

Financing The Future

Innovative financing and project delivery are long-term solutions to infrastructure projects that benefit all parties involved. The possibilities for flexible financing are endless and customised based on the end user’s situation and preferences. The following terms are general frameworks used to determine the asset builder's and customer's project dynamics. They establish ownership, partner responsibilities, and payment terms. These financing methods can differ in their structure but ultimately deliver similar benefits.

Build-Operate-Transfer (BOT): In a BOT contract, a government entity permits an EPC like BW Water to finance, design, build, and then operate a treatment plant or other water asset over a designated timeframe. These contracts specify the needs of the end user, cost estimates, and projected utility rates over the payback period. After the EPC builds the infrastructure assets, it owns and operates them, recouping its investment through user fees. Once the EPC has recovered its investment per the contract terms, it transfers asset ownership to the customer.

This partnership allows municipalities and businesses to invest in and ultimately own their water assets without upfront capital. While the EPC takes on much of the risk and work, the public entity customer is involved from the beginning of the process without burdening its resources. However, there can be downsides. At the end of a BOT contract, the newfound owner must be prepared to take on budgeting for the transferred asset, find and retain operations staff, and collect customer fees.

Build-Own-Operate (BOO): BOO contracts contain many of the same terms as BOTs, with the exception that the private entity, like BW Water, retains asset ownership over its lifespan. This long-term relationship requires the private entity to provide reliable services to the customer indefinitely. BOO is advantageous to public entities that need to develop water infrastructure but want to avoid the capital and operations expenses of ownership. Private ownership can lead to more innovative and cost-effective operations, assuring affordability to the public sector’s constituents.

Design-Build-Operate (DBO): DBO is a project delivery method where a sole entity is responsible for a facility's design, construction, and operation. The customer retains asset ownership throughout the project, while the private entity handles execution, management, and operation for a specified period.

DBO merges innovative delivery methods with innovative financing models. Design-build case studies show reduced construction and design costs and shorter delivery timelines of larger infrastructure projects. They offer customers a guaranteed maximum price (GMP) at the beginning of the project to establish expectations. Financing for DBOs can vary, sometimes employing a hybrid model where the customer contributes capital funds and repays the remaining project costs over the DBO entity’s operations contract. This approach manages operations fees while exposing the customer to more risk.

Design-Build-Finance-Operate (DBFO): DBFO is a full-suite service that places complete responsibility of the asset on the private entity in one contract. The private party handles financing, designs, constructs, and operates the treatment plant while the customer maintains ownership with little financial commitment. Like the other financing models listed, the private entity recoups its investment through operations fees from end users over a specified time frame. The customer can elect to continue the EPC’s operation services after the asset’s contract is fulfilled.

Water-as-a-Service (WaaS): WaaS is a comprehensive water management service paid on a subscription or pay-per-use basis. Instead of investing in water infrastructure, municipalities and industries rely on a private provider like BW Water to manage water sourcing, treatment, distribution, and wastewater management.

Based on the water needs of the public or private entity, the WaaS provider builds a tailored treatment solution to meet the customer's specifications with high technology, such as IoT, Artificial Intelligence, and the latest treatment equipment. This model is the least risky for customers, with no capital expenses required and shorter contract terms than the other models described above.

Let’s Get Started

Trillions of dollars will need to be spent over the next few decades to meet the world’s infrastructure needs. Innovative financing models facilitate these projects by overcoming the barriers of traditionally capital-intensive financing options. With these varied and flexible models, governments and private entities alike can:

• Secure project financing
• Minimise capital expenses
• Manage risk tolerance
• Access cutting-edge technology and expertise
• Comply with regulations
• Outsource workforce solutions

Water infrastructure solutions require an EPC that is as dynamic as the world we live in. BW Water is leading the water infrastructure sector by offering innovative financing models to communities and businesses globally. Contact BW Water today for tailored financing solutions that meet your unique water infrastructure needs.