Money for Water and Heat

Analysts believe that investments of private funds in water supply and disposal systems reconstruction and building are the most profitable. This statement is supported by many examples of concession agreements in Russian regions.

Dmitry Baranov, Finam Management lead expert, believes that the most attractive investment objects in the housing and utilities sector are water service companies. "This can be explained by the fact that the main necessary infrastructure of water service companies is already built and there is a high demand for water, so a significant cash flow is generated here. At the same time, there is still an opportunity to improve water supply and disposal, reduce water loss and increase its quality. Consumers are ready to pay more for this. Furthermore, many people still don't have access to high-quality drinking water. This creates an opportunity to gain new consumers, which will increase water service companies' income and create extra profits for investors," commented the expert.  
He says that not only Russian companies operate on the market, but also foreign players. The largest and active competitors on this market are Suez and Veolia (France). Remondis (Germany), as well as a number of Russian companies: Rosvodokanal, GC Evraziyskiy, Russian Communal Systems, etc.
Among successful examples of public-private contract implementation in the area of water supply and disposal is building and reconstruction of water disposal and supply systems in the Moscow Region by GC Morton.  
Another attractive segment of housing and utilities industry remains heat supply, analysts say. "This service is always much needed, and it gives businesses a great opportunity to make profits," states Baranov. Furthermore, the changing legislation in the heat supply segment, transition from regulated rates to indicative prices and creation of the base for unified heating supply companies' (UHSC) operation increase private investors' interest in this segment."

Opinion

Dmitry Baranov, Finam Management lead expert:

- Every rate increase for housing and utilities services reopens the discussion of fairness of such increases. To my mind, a compromise should be reached between suppliers' motivation to get a maximum income and consumers' will to pay a reasonable price for heat, gas, electricity, water supply and wastewater disposal, municipal solid waste disposal and other services. If the housing and utility rates become too low, utility providers won't have enough funds to repair and renovate their fixed assets. But if the rates get too high, most consumers will not be able to pay, which will lead to huge volumes of non-payment.