Spain Water Treatment Investment to Fuel M&A

Spain Water Treatment Investment To Fuel M&A

Spain Water Treatment Investment To Fuel M&A

Spain has lead the way in industries like fashion retail, tourism and wind energy. But the Spanish water treatment sector is one that has lagged behind some of its European peers and risked the wrath of the European Commission.

In May 2010, the Commission filed a complaint against Spain with the European Union’s Court of Justice for failing to guarantee water treatment services in 38 cities.

Since then, the Commission has kept the country on its radar, pressing for the necessary infrastructure investment. And the situation has improved. The Commission’s August report on EU water treatment services flagged that Spain’s compliance rate with wastewater regulations was 98 per cent compared with a European average of 94 per cent.

So what has been the catalyst for change? Spain has benefited from the EU’s investment of 14.3 billion euros to support wastewater treatment in Europe between 2007-2013. But local players have also built up successful water treatment businesses, working to achieve full EU compliance.

SPAIN INVESTS IN WATER TREATMENT

Acciona Agua is a leader in the water treatment sector and manages more than 300 water treatment plants in Spain.

Aqualia, owned by Spanish infrastructure company FCC, is the third largest water management company in the world and has won many water treatment contracts with local Spanish authorities.

Valencia-based Depuracion de Aguas del Mediterraneo (DAM) has also been busy. This independent company operates 250 plants, which treat 21 per cent of Spain’s water resources.

But there is still much to be done.  Many Spanish towns with less than 10,000 inhabitants are still not complying with EU rules.

PRIVATE INVESTMENT SOLUTION

Spain needs to invest over 10 billion euros by 2015 to meet EU wastewater treatment requirements, according to industry experts.

The country’s 17 autonomous regions are responsible for wastewater infrastructure, but their budgets have been slashed as a result of the financial crisis, so investment has suffered. In July 2012, only the regions of Murcia and Navarre met EU wastewater legislation requirements. Five regions had significant deficiencies in wastewater treatment due to a lack of infrastructure funding.

Private investment is seen as the solution to this financing predicament. Spanish construction firms are pressing public administrations to tender more privately financed water infrastructure contracts. These concessions will attract local companies but, more importantly, will also spark interest from overseas investors with easier access to credit to develop projects.

But the sector’s regulatory framework needs reforming to instil investor confidence. New formulas, such as offering tenders for combined supply and wastewater treatment, need to be developed.

Nevertheless, the growth potential for the Spanish water treatment industry is substantial, which in turn will fuel M&A in Spain as new players enter the ring.

For more information on Spain’s water treatment services, contact corporate law firm Argali Abogados.

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