BMI View: This quarter we have updated and expanded our water forecasts for Hungary, adding in new lines of data, including type of water source. We have substantially upgraded our treated wastewater forecasts based on improved government investment into advanced treatment facilities, and we continue to view the mains and sewage networks as the key future development areas, with losses remaining high, and a significant portion of wastewater not being collected.
The establishing of five regional utilities and over 400 municipal utility companies in the post-Soviet era, and the implementation of water charges being related to delivery costs resulted in a decentralised and incoherent water sector, with each individual municipality having autonomous control. This in turn led to inefficient and frequently overpriced water services. In addition, the maintenance and modernisation of networks was frequently neglected, resulting in high leakages and numerous non-connected settlements; problems which persist in modern day Hungary. This has caused increased pipe bursts, and as operational costs rise but tariffs do not, assets are being used and not replaced, leaving the country in direct violation of the European Water Framework Directive.
However, we view the implementation of the Water Utilities Act in 2011 as a positive development, which will result in the improvement and modernisation of the sector, offering more appealing prospects for services companies and opportunities for infrastructure groups. The rapid consolidation in the water services sector over the past three years is an extremely positive development, which will continue, in our view, and will offer significant benefits to the consumers. Initially at over 1000 utilities, the number is now down to 46, with plans for this to drop further to 40 by the end of 2015, as utilities will have to have at least 150,000 household connections in order to continue to exist.
In addition tariffs are going to be...