Why Prop Six Could Mean More Water Investments

Now that Texas voters have approved Proposition 6, which allows the state to borrow from its rainy day fund to finance water infrastructure projects, they may have also given a boost to water infrastructure investors. Experts say betting on water projects could be a wise move.

Companies who play a big part in building water infrastructure could be getting a lot more business now that voters have okayed Proposition Six. It would take around $2 billion dollars from the state’s rainy day fund to begin funding water projects across Texas. Claudia Mollerup-Madsen is a vice-president and financial advisor with Morgan Stanley here in Houston. 

“We believe that now that the state is willing to spend that much money in infrastructure, it really opens up a whole variety of businesses and opportunity in the whole state. Pipelines, new infrastructure, new desalination, transportation, agriculture, I think really different sectors of the state as a whole will be able to participate in this opportunity.” 

Mollerup-Madsen says water infrastructure investment has a wide array of risk, from not much to a lot. 

“You’ll have some sectors which will be based on fundamentals and growth and I would tend to say that they are less risky. Now,  when you’re looking for more creative ways of making clean water and so forth, now you’re looking at a riskier kind of investment.  Generally speaking, you want to look at the fundamentals of a company first and then look at the tactical and see what area and what percentage of your portfolio is appropriate.” 

Texas has a 50-year water infrastructure improvement plan as the state looks for ways to ensure a reliable source of water over the next few decades. Many parts of the state have been stuck in a drought over the past several years.