On 11 November 2014 the Italian government enacted its ‘Unlock Italy’ set of economic reforms. This decree facilitates the reduction of municipal multi-utility holdings in the water sector to reduce debt. It also builds on the 2012 Development Decree (83/2012) that laid out tendering terms for awarding public water concessions to private operators, which includes longer term tariff visibility and less risk for ownership transfers. As part of 2015 budget negotiations, the government envisions greater regional consolidation to create fewer, more efficient water utilities led by potential national champions such as Acea SpA, Gruppo Hera, Iren Group, and A2A. Italy currently hosts over 100 regional water utilities.
These groups reported strong nine-month 2014 earnings in November, aided by a tariff increase passed last year (resolution 643/2013). For Acea, water delivered an 8% EBITDA increase compared to the nine-month period of the previous year, and Iren Group saw a 33% EBITDA jump over the same period while Hera and A2A results remained flat.
Bluefield Takeaways
- Acea evolves as Suezs third European pillar, positions to emerge as national champion
- Italy concession opportunities to become hotbed for foreign player expansion
- Private investment sorely needed for lagging urban wastewater compliance
