United Water will partner with an institutional investor to form an entity that provides a city with a lump sum to pay down accumulated debt and initiate capital investment in its water system. This money is not a loan to the city. The lump sum will instead be recouped through standard water rates throughout the duration of the contract. The city maintains ownership and regulatory oversight of the utility: it never leaves public hands. The city also continues to govern and approve water rates. United Water, for its part, will then take over operations and repairs in exchange for the standard, resident-paid water usage fees.
United Water has more than 140 years of experience in water management and proven success in bettering the environment. Its solutions at city level are backed by the shared global intelligence of its parent, Suez Environnement, one of the world's largest utilities. United Water's ability to manage systems more efficiently means it is able to significantly reduce energy use and operating costs, which it can spread across the organization.
United Water will begin in the City of Bayonne, New Jersey and Nassau County, New York. In Bayonne, the Bayonne Municipal Utility Authority will be able clear its entire $130 million of accumulated debt. United Water will make a capital investment of $14.5 million in the first three years and $2.5 million investment annually over rest of the contract's 40-year duration.
In Nassau County, the combined venture of United Water and its financial partner will invest $700 million for municipal debt retirement and $400 million in capital investment over the first 10 years of the initial 20-year term.
Overall, in the five-year commitment period, United Water and its financial partner will make an investment of $830 million in municipal debt retirement and $295.5 million in new capital investment in Bayonne and Nassau combined.
That is a total of $1,125.5 million during the five-year commitment period.
The first five years of each project in Bayonne (a 40-year project) and Nassau County (initial 20-year term) overlap and encompass this commitment. The project in Bayonne will be launched
on 11/01/2012, with its five year period ending on 11/01/2017, while the project in Nassau County will be launched on 01/01/2013 and end on 01/01/2018.
Over the five-year commitment period in Bayonne, capital investment will include installing automated metering, supervisory control and data acquisition, improved workplace safety measures, and staff training. With remote TV technology, United Water will make visual inspections of the city's underground water pipes. Overall, this will enable United Water to locate leakages and where there may be imminent system failures in order to prioritize refurbishment and improve the efficiency of the system. An existing 1.5 MW wind turbine in Bayonne - which will also be operated by United Water - will create enough to operate the system.
Over the five-year commitment period in Nassau County, capital investment will focus on several areas that will lead directly to new operational efficiencies, reduced energy use, and more reliable adherence to federal and state water quality and environmental protection standards. Specifically, engineering work will address system weaknesses, thereby reducing energy consumption and capture of methane for county use, reducing chemical usage in treatment, reducing sludge volumes and disposal, increasing automation, and installing more efficient system controls.
Improvements in Nassau County will create energy savings that will reduce greenhouse gas emissions by over 15,000,000 pounds of CO2 per year. This is related to a reduction in fuel use through maximizing use of energy in the bio-solids produced and reduced trucking.
Overall, during the five-year commitment period, United Water's investment will create an estimated 100 new jobs in local technology and construction firms. Staff training will lead to the upskilling of 20 employees in Bayonne.
Maintaining clean, sustainable water supplies is the single most important contributor to public health and is essential to the growth of the economy. Our future will, in many ways, be defined by our ability to meet this challenge. The American Society of Civil Engineers gives the country's water infrastructure a 'D' grade. The U.S Federal Government says it will take over $600 billion over the next two decades to restore the country's water and sewer systems, many of which were built during the post-World War II era. Decades of underinvestment, even as demand has increased, has pushed systems to breaking point.
Cities throughout America have little or no capacity to respond to this challenge on their own. Their accumulation of debt - compounded by the recent economic crisis - means they cannot afford necessary investment nor do most communities have the technical capability to restore their water systems.
United Water is offering a groundbreaking solution to attract long-term, private investment to improve municipal water systems in a way that - for the first time in the U.S. - also enables local authorities to clear millions of dollars of accumulated debt, promote job creation, create a cleaner environment, and ensure that ownership and stewardship of the water system never leaves public hands. The city continues to govern and approve water rates.
Residents are protected from sudden, sharp water rate rises. It is a win for United Water and its investor partners because guaranteed provision for capital investment in the water infrastructure reduces the risk of high repair costs caused by major system failures - and thereby enables them to commit to communities for upwards of 20 years.