Water access is undeniably strained worldwide. Morgan Stanley Infrastructure Partners used Water-as-a-Service® to help overcome this challenge, with its prior portfolio company Seven Seas Water Group.
The WHO says that as of 2024, 2.1 billion people lack access to safely managed drinking water. Global demand for freshwater has only continued to rise, growing by just under 1% per year since the 1980s according to the UN. With aging infrastructure, climate change, and shifting populations putting increasing pressure on public finances, the issue is only set to intensify.
Private markets are recognising the long-term investment opportunity.
“Waste and water are two sectors where macro tailwinds are driving significant investment opportunities,” says Alberto Donzelli, Managing Director and Co-Head of Europe at Morgan Stanley Infrastructure Partners (MSIP).
“Population and economic growth both drive rising water demand. Water is the most critical and essential of societal needs. Climate change, at its core, often reduces water availability where it’s needed most – while also triggering extreme weather events that cause flooding and droughts.”
The growing global need for water services aligns with MSIP’s broader investment strategy focused on critical infrastructure that delivers essential services to the communities and industries in which it operates.
The firm invests across four verticals – digital, transport, energy transition, and utilities – focusing on assets that deliver stable, inflation-protected returns, with room to unlock further value through strategic, operational, and capital improvements.
The investment
In 2020, that strategy led MSIP to invest in Seven Seas Water Group – a developer, owner, and operator of water and wastewater treatment plants. Through its Water-as-a-Service® (WaaS) model, the company provides reliable, safe, and environmentally compliant water and wastewater treatment to a diverse range of customers – including government agencies, municipalities, industrial operators, and hospitality providers.
“It’s positioned at the front end and the back end of the water lifecycle,” explains Donzelli. “The front end being the creation of water through desalination, and the back end being wastewater treatment.” While the company builds, owns and operates treatment infrastructure, it does not own the distribution networks – the customers do.
The company has evolved significantly since it was first acquired by MSIP.
In conjunction with the public-to-private transaction, the business was split into two parts: infrastructure and non-infrastructure operations.
“We partnered with a non-infrastructure products and services water company, and as part of the take-private deal, we separated the business,” says Donzelli. “We acquired the infrastructure-related desalination and wastewater operations, while our partner bought the non-infrastructure side. It was a great fit – we were both able to extract the business profiles we wanted.”
After a management reshuffle, MSIP revisited the company’s geographic focus. At the time of acquisition, Seven Seas had a footprint concentrated in the Caribbean, with ambitions in emerging markets like Africa, Brazil, the Middle East, and Asia.
MSIP took a more focused approach in line with its investment mandate. “There was no need to go so far afield when there was strong demand right here,” Donzelli recalls. The company shifted its attention to Texas, while continuing to serve select US territories in the Caribbean.
The Texas Water Development Board’s 2022 State Water Plan forecasts an 18% drop in water supply and a 9% rise in demand by 2070. Without intervention, one quarter of the state’s population could face municipal water shortages.
Rather than pursue massive infrastructure projects, Seven Seas targeted smaller, decentralised systems in underserved towns. This approach not only provided essential services to local communities, but also enabled the company to deploy accretive investment capital into new water and wastewater treatment plants.
Today, the company manages 220 plants across North America – including the United States, the Caribbean, and Latin America. These plants are offered as long-term WaaS models, with many executed through inflation-linked contracts that include take-or-pay minimum volume commitments.
This structure provides stable and predictable cash flows over the long term, Donzelli explains.
Under MSIP’s ownership, Seven Seas nearly tripled its potable water capacity, growing from 11 to 27 billion gallons annually, increased contracted wastewater treatment facilities from 131 to 202, and doubled its contracted revenues.
In May, after a five-year hold period, MSIP sold its stake in Seven Seas Water Group to the EQT Infrastructure VI fund.
The bigger picture
Water scarcity will continue to be a global problem moving forward. The UN says that by 2040, demand for water could exceed supply by 40%.
As for wastewater, the US Environmental Protection Agency estimates that up to $75bn in investment will be required for decentralised wastewater treatment across the country by 2042 in order to meet national water quality goals.
Meanwhile, in 2024 China invested a record CNY1.35tn (approximately $188bn) in the construction of water conservancy infrastructure, according to official data.
Last year also saw the UK’s water regulator Ofwat approve £104bn in investment for water and sewage infrastructure between 2025 and 2030 – nearly double the previous five-year period.
“There’s a growing sense of urgency,” says Donzelli. “Government agencies around the world are making clear statements about the need to improve resilience. But getting there comes with challenges: significant capital requirements and lack of funding, navigating regulation, and more.”
This is where private markets come in.
“Seven Seas provides a level of expertise, cost structure, and operating capabilities that many municipalities cannot provide to their served populations,” Donzelli explains.
“That has created the opportunity for Seven Seas to supply independent, reliable, and affordable safe drinking water and wastewater treatment to areas in need, providing a tremendous opportunity for population and economic growth in those regions.”
