Die Banken Mafia, investiert in Wasser – The New “Water Barons”: Wall Street Mega-Banks are Buying up the World’s Water
This article was first published on December 21, 2012
A disturbing trend in the water sector is accelerating worldwide. The new “water barons” — the Wall Street banks and elitist multibillionaires — are buying up water all over the world at unprecedented pace.
Familiar mega-banks and investing powerhouses such as Goldman Sachs, JP Morgan Chase, Citigroup, UBS, Deutsche Bank, Credit Suisse, Macquarie Bank, Barclays Bank, the Blackstone Group, Allianz, and HSBC Bank, among others, are consolidating their control over water. Wealthy tycoons such as T. Boone Pickens, former President George H.W. Bush and his family, Hong Kong’s Li Ka-shing, Philippines’ Manuel V. Pangilinan and other Filipino billionaires, and others are also buying thousands of acres of land with aquifers, lakes, water rights, water utilities, and shares in water engineering and technology companies all over the world.
The second disturbing trend is that while the new water barons are buying up water all over the world, governments are moving fast to limit citizens’ ability to become water self-sufficient (as evidenced by the well-publicized Gary Harrington’s case in Oregon, in which the state criminalized the collection of rainwater in three ponds located on his private land, by convicting him on nine counts and sentencing him for 30 days in jail). Let’s put this criminalization in perspective:
Billionaire T. Boone Pickens owned more water rights than any other individuals in America, with rights over enough of the Ogallala Aquifer to drain approximately 200,000 acre-feet (or 65 billion gallons of water) a year. But ordinary citizen Gary Harrington cannot collect rainwater runoff on 170 acres of his private land.
It’s a strange New World Order in which multibillionaires and elitist banks can own aquifers and lakes, but ordinary citizens cannot even collect rainwater and snow runoff in their own backyards and private lands.
“Water is the oil of the 21st century.” Andrew Liveris, CEO of DOW Chemical Company (quoted in The Economist magazine, August 21, 2008)
In 2008, I wrote an article,
“Why Big Banks May Be Buying up Your Public Water System,” in which I detailed how both mainstream and alternative media coverage on water has tended to focus on individual corporations and super-investors seeking to control water by buying up water rights and water utilities. But paradoxically the hidden story is a far more complicated one. I argued that the real story of the global water sector is a convoluted one involving “interlocking globalized capital”: Wall Street and global investment firms, banks, and other elite private-equity firms — often transcending national boundaries to partner with each other, with banks and hedge funds, with technology corporations and insurance giants, with regional public-sector pension funds, and with sovereign wealth funds — are moving rapidly into the water sector to buy up not only water rights and water-treatment technologies, but also to privatize public water utilities and infrastructure.
Now, in 2012, we are seeing this trend of global consolidation of water by elite banks and tycoons accelerating. In a JP Morgan equity research document, it states clearly that “Wall Street appears well aware of the investment opportunities in water supply infrastructure, wastewater treatment, and demand management technologies.” Indeed, Wall Street is preparing to cash in on the global water grab in the coming decades. For example, Goldman Sachs has amassed more than $10 billion since 2006 for infrastructure investments, which include water. A 2008 New York Times article mentioned Goldman Sachs, Morgan Stanley, Credit Suisse, Kohlberg Kravis Roberts, and the Carlyle Group, to have “amassed an estimated an estimated $250 billion war chest — must of it raised in the last two years — to finance a tidal wave of infrastructure projects in the United States and overseas.”
By “water,” I mean that it includes water rights (i.e., the right to tap groundwater, aquifers, and rivers), land with bodies of water on it or under it (i.e., lakes, ponds, and natural springs on the surface, or groundwater underneath), desalination projects, water-purification and treatment technologies (e.g., desalination, treatment chemicals and equipment), irrigation and well-drilling technologies, water and sanitation services and utilities, water infrastructure maintenance and construction (from pipes and distribution to all scales of treatment plants for residential, commercial, industrial, and municipal uses), water engineering services (e.g., those involved in the design and construction of water-related facilities), and retail water sector (such as those involved in the production, operation, and sales of bottled water, water vending machines, bottled water subscription and delivery services, water trucks, and water tankers).
Update of My 2008 Article: Mega-Banks See Water as a Critical Commodity
Since 2008, many giant banks and super-investors are capturing more market share in the water sector and identifying water as a critical commodity, much hotter than petroleum.
Goldman Sachs: Water Is Still the Next Petroleum
In 2008, Goldman Sachs called water “the petroleum for the next century” and those investors who know how to play the infrastructure boom will reap huge rewards, during its annual “Top Five Risks” conference. Water is a U.S.$425 billion industry, and a calamitous water shortage could be a more serious threat to humanity in the 21st century than food and energy shortages, according to Goldman Sachs’s conference panel. Goldman Sachs has convened numerous conferences and also published lengthy, insightful analyses of water and other critical sectors (food, energy).
Goldman Sachs is positioning itself to gobble up water utilities, water engineering companies, and water resources worldwide. Since 2006, Goldman Sachs has become one of the largest infrastructure investment fund managers and has amassed a $10 billion capital for infrastructure, including water.
In March 2012, Goldman Sachs was eyeing Veolia’s UK water utility business, estimated at £1.2 billion, and in July it successfully bought Veolia Water, which serves 3.5 million people in southeastern England.
Previously, in September 2003, Goldman Sachs partnered with one of the world’s largest private-equity firm Blackstone Group and Apollo Management to acquire Ondeo Nalco (a leading company in providing water-treatment and process chemicals and services, with more than 10,000 employees and operations in 130 countries) from French water corporation Suez S.A. for U.S.$4.2 billion.
In October 2007, Goldman Sachs teamed up with Deutsche Bank and several partners to bid, unsuccessfully, for U.K.’s Southern Water. In November 2007, Goldman Sachs was also unsuccessful in bidding for U.K. water utility Kelda. But Goldman Sachs is still looking to buy other water utilities.
In January 2008, Goldman Sachs led a team of funds (including Liberty Harbor Master Fund and the Pinnacle Fund) to buy U.S.$50 million of convertible notes in China Water and Drinks Inc., which supplies purified water to name-brand vendors like Coca-Cola and Taiwan’s top beverage company Uni-President. China Water and Drinks is also a leading producer and distributor of bottled water in China and also makes private-labeled bottled water (e.g., for Sands Casino, Macau). Since China has one of the worse water problems in Asia and a large emerging middle class, its bottled-water sector is the fastest-growing in the world and it’s seeing enormous profits. Additionally, China’s acute water shortages and serious pollution could “buoy demand for clean water for years to come, with China’s $14.2 billion water industry a long-term investment destination” (Reuters, January 28, 2008).
The City of Reno, Nevada, was approached by Goldman Sachs for “a long-term asset leasing that could potentially generate significant cash for the three TMWA [Truckee Meadows Water Authority] entities. The program would allow TMWA to lease its assets for 50 years and receive an up-front cash payment” (Reno News & Review, August 28, 2008). Essentially, Goldman Sachs wants to privatize Reno’s water utility for 50 years. Given Reno’s revenue shortfall, this proposal was financially attractive. But the water board eventually rejected the proposal due to strong public opposition and outcry.
Citigroup: The Water Market Will Soon Eclipse Oil, Agriculture, and Precious Metals
Citigroup’s top economist Willem Buitler said in 2011 that the water market will soon be hotter the oil market (for example, see this and this):
“Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals.”……………………….
Deutsche Bank’s €2 Billion Investment in European Infrastructure: “Megatrend” in Water, Climate, Infrastructure, and Agribusiness Investments
Deutsche Bank is one of the major players in the water sector worldwide. Its Deutsche Bank Advisors have identified water as a part of the climate investment strategies. In its presentation, “Global Warming: Implications for Investors,” they have identified the four following major areas for water investment:
§ Distribution and management: (1) Supply and recycling, (2) water distribution and sewage, (3) water management and engineering.
§ Water purification: (1) Sewage purification, (2) disinfection, (3) desalination, (4) monitoring.
§ Water efficiency (demand): (1) Home installation, (2) gray-water recycling, (3) water meters.
§ Water and nutrition: (1) Irrigation, (2) bottled water.
In addition to water, the other two new resources identified were agribusiness (e.g., pesticides, genetically modified seeds, mineral fertilizers, agricultural machinery) and renewable energies (e.g., solar, wind, hydrothermal, biomass, hydroelectricity).
The Deutsche Bank has established an investment fund of up to €2 billion in European infrastructure assets using its Structured Capital Markets Group (SCM), part of the bank’s Global Markets division. The bank already has several “highly attractive infrastructure assets,” including East Surrey Holdings, the owner of U.K.’s water utility Sutton & East Surrey Water (Deutsche Bank press release, September 22, 2006).
Moreover, Deutsche Bank has channeled €6 billion (U.S.$8.55 billion) into climate change funds, which will target companies with products that cut greenhouse gases or help people adapt to a warmer world, in sectors from agriculture to power and construction (Reuters, October 18, 2007).
In addition to SCM, Deutsche Bank also has the RREEF Infrastructure, part of RREEF Alternative Investments, headquartered in New York with main hubs in Sydney, Singapore, and London. RREEF Infrastructure has more than €6.7 billion in assets under management. One of its main targets is utilities, including electricity networks, water-treatment or distribution operations, and natural-gas networks. In October 2007, RREEF partnered with Goldman Sachs, GE, Prudential, and Babcok & Brown Ltd. to bid unsuccessfully for U.K.’s water utility Southern Water.
§ Crediting the boom in European infrastructure investment, the RREEF fund by August 2007 had raised €2 billion (U.S.$2.8 billion); Europe’s infrastructure market is valued at between U.S.$4 trillion to U.S.$6 trillion (DowJones Financial News Online, August 7, 2007).
§ Bulgaria — Deutsche Bank Bulgaria is planning to participate in large infrastructure projects, including public-private partnership projects in water and sewage worth up to €1 billion (Sofia Echo Media, February 26, 2008).
§ Middle East — Along with Ithmaar Bank B.S.C. (an private-equity investment bank in Bahrain), Deutsche Bank co-managed a U.S.$2 billion Shari’a-compliant Infrastructure and Growth Capital Fund and plans to target U.S.$630 billion in regional infrastructure.
Deutsche Bank AG is co-owner of Aqueduct Capital (UK) Limited which in 2006 offered to buy U.K.’s sixth-largest water utility Sutton and East Surrey Water plc from British tycoon Guy Hand. According to an OFWAT consultation paper (May 2007), Deutsche Bank formed this new entity, Aqueduct Capital (short for ACUK), in October 2005, with two public pension funds in Canada, Singapore’s life insurance giant, and a Canadian province’s investment fund, among others. This case, again, is an illustration of the complex nature of ownership of water utilities today, with various types of institutions crossing national boundaries to partner with each other to hold a stake in the water sector. With its impressive war chest dedicated to water, food, and infrastructure, Deutsche Bank is expected to become a major player in the global water sector.
Other Mega-Banks Eyeing Water as Hot Investment
Merrill Lynch (before being bought by Bank of America) issued a 24-page research report titled “Water scarcity; a bigger problem than assumed” (December 6, 2007). ML said that water scarcity is “not limited to arid climates.”
Morgan Stanley in its publication, “Emerging Markets Infrastructure: Just Getting Started” (April 2008) recommends three areas of investment opportunities in water: water utilities, global operators (such as Veolia Environment), and technology companies (such as those that manufacture membranes and chemicals used in water treatment to the water industry).
Mutual Funds and Hedge Funds Join the Action in Water
Water investment funds are on the rise, such as these four well-known water-focused mutual funds:
1. Calvert Global Water Fund (CFWAX) — $42 million in assets as of 2010, which holds 30% of its assets in water utilities, 40% in infrastructure companies, and 30% in water technologies. Also between 65% to 70% of the water stocks derived more than 50% of their revenue from water-related activities.
2. Allianz RCM Global Water Fund (AWTAX) — $54 million assets as of 2010, most of it invested in water utilities.
3. PFW Water Fund (PFWAX) — $17 million in assets as of 2010, with a minimum investment of $2,500, with 80% invested in water-related companies….
4. Kinetics Water Infrastructure Advantaged Fund (KWIAX) — $26 million in assets as of 2010, with a minimum investment of $2,500.
This is a brief list of water-centered hedge funds:
§ Master Water Equity Fund — Summit Global AM (United States)
§ Water Partners Fund — Aqua Terra AM (United States)
§ The Water Fund — Terrapin AM (United States)
§ The Reservoir Fund — Water AM (United States)
§ The Oasis Fund — Perella Weinberg AM (United States)
§ Signina Water Fund — Signina Capital AG (Switzerland)
§ MFS Water Fund of Funds — MFS Aqua AM (Australia)
§ Triton Water Fund of Funds — FourWinds CM (United States)
§ Water Edge Fund of Funds — Parker Global Strategies LLC (United States)
Other banks have launched water-targeted investment funds. Several well-known specialized water funds include Pictet Water Fund, SAM Sustainable Water Fund, Sarasin Sustainable Water Fund, Swisscanto Equity Fund Water, and Tareno Waterfund. Several structured water products offered by major investment banks include ABN Amro Water Stocks Index Certificate, BKB Water Basket, ZKB Sustainable Basket Water, Wagelin Water Shares Certificate, UBS Water Strategy Certificate, and Certificate on Vontobel Water Index. There are also several water indexes and index funds, as follows:
Credit Suisse Water Index
HSBC Water, Waste, and Pollution Control Index
Merrill Lynch China Water Index
S&P Global Water Index
First Trust ISE Water Index Fund (FIW)
International Securities Exchange’s ISE-B&S Water Index
The following is a small sample of other water funds and certificates (not exhaustive of the current range of diverse water products available):
Allianz RCM Global EcoTrends Fund
Allianz RCM Global Water Fund
UBS Water Strategy Certificate—it has a managed basket of 25 international stocks
Summit Water Equity Fund
Maxxwater Global Water Fund
Claymore S&P Global Water ETF (CGW)
Barclays Global Investors’ iShares S&P Global Water
Barclays and PDL’s Protected Water Fund based on Barclays World Water Strategy
Invesco’s PowerShares Water Resources Portfolio ETF (PHO)
Invesco’s PowerShares Global Water (PIO)
Pictet Asset Management’s Pictet Water Fund and Pictet Water Opportunities Fund
Canadian Imperial Bank of Commerce’s Water Growth Deposit Notes
Criterion Investments Limited’s Criterion Water Infrastructure Fund
One often-heard reason for the investment banks’ rush to control of water is that “Utilities are viewed as relatively safe assets in an economic downturn so [they] are more isolated than most from the global credit crunch, initially sparked by concerns over U.S. subprime mortgages” (Reuters, October 9, 2007). A London-based analyst at HSBC Securities told Bloomberg News that water is a good investment because “You’re buying something that’s inflation proof and there’s no threat to earnings really. It’s very stable and you can sell it any time you want” (Bloomberg, October 8, 2007).
More Pension Funds Investing in Water
Many pension funds have entered the water sector as a relatively safe sector for investment. For example, BT Pension Scheme (of British Telecom plc) has bought stakes in Thames Water in 2012, while Canadian pension funds CDPQ (Caisse de dépôt et placement du Québec, which manages public pension funds in Québec) and CPPIB (Canada Pension Plan Investment Board) have acquired England’s South East Water and Anglian Water, respectively, as reported by Reuters this year.
Alan Grrenspan, over the bank gansters