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Quarterly Report on Water Industry Developments in Latin America -- September 2002 September 2002
In this issue:
General
Upcoming Conferences
General
- In late August, the International Finance Corporation (IFC) announced that it has created three new environmental facilities
to increase the private sector's role in addressing environmental and social issues in the emerging markets, including Latin
America and the Caribbean. The IFC is the World Bank's private sector development arm and its mission is to promote sustainable
private sector investment in developing countries. Funding for the environmental opportunities facility (EOF), the sustainable
financial markets facility (SFMF) and the corporate citizenship facility (CCF) is expected to total US$55mn over the next
five years, with the IFC contributing US$10mn and donor governments the balance.
- According to Pan-American Health Organization health and environment division director Mauricio Perdon Ojeda, some 70 million
residents in Latin America lack potable water.
- Some US$165mn in business is expected to be generated at water, waste and environment tradeshow Expo Agua, Residuos & Ambiente,
which will be held in Chilean capital Santiago June 25-28, 2003, according to reports in local press. Some 15 countries and
150 companies will showcase their goods and services, and an estimated 8,000 sector professionals are expected to attend.
- The idea to form the Latin American Water Education and Training Network (LA-WETnet) was triggered via a series of informal
consultations during and after the 3rd WET Symposium in Delft, The Netherlands (November 2001). One immediate follow up to
this symposium was a workshop organized in Lima, Peru, from July 15 to 17, 2002, which brought together water professionals
from all over Latin America to foster regional co-operation initiatives in water education and training. Thirty-six participants,
representing the regional TACs, AIDIS, Universities, Governments, UN Agencies (UNESCO-IHE, Cap-Net, PAHO) and sector organizations
attended the workshop. Participants represented a cross section of IWRM, water services disciplines and capacity building
for the development sector. LA-WETnet is proposed as a regional network, linking up partners actively involved in water education
and training (supply side) with sector institutions and professional associations (demand side). The official launching of
LA-WETnet is proposed to take place during the upcoming biannual Congress of AIDIS in Cancun, Mexico.
Argentina
- Paris-based Suez Group will take a 500mn euro (US$496mn) charge on consolidated accounts as of June 30, 2002 to cover effects
of the Argentine crisis, according to statements made by the company in early July. The charge is one of two measures Suez
announced in the light of the Argentine crisis. It has also invoked procedures provided under a bilateral investment treaty
signed by France and Argentina to cover its Argentine exposure. These procedures commit the Argentine government to reach
an amicable agreement with French investors in Argentina concerning corrective and compensatory measures in relation to disputes
affecting such investors when such disputes arise from actions or omissions of the government, explained Suez. According to
Suez, should these negotiations not produce a conciliatory agreement within six months, the Group can seek to resolve the
issue through international arbitration under the jurisdiction of the International Center for Settlement of Investment Disputes
(ICSID). Suez's exposure in Argentina comes mainly from the water sector, where Ondeo supplies 11 million residents with potable
water and 7.5 million with wastewater treatment services in Buenos Aires (Aguas Argentinas), Santa Fe (Aguas Provinciales
de Santa Fe) and Cordoba (Aguas Cordobesas).
- Spanish waterworks company Agbar posted net profits of 91.9mn euros (US$90mn) for 1H02, up 70% from 1H01 thanks largely to
the sale of 25% of Adeslas in January for 200mn euros and the amortization of its Argentine investments. Operating profits
were 80.7mn euros, down 40% from 113mn euros in 1H01, due to poor results from Argentine subsidiaries. In Argentina Agbar
wrote off 88mn euros due to local currency devaluation, but amortized 58mn euros. Total amortizations grew to 106mn in 1H02.
The group has provisioned an additional 100mn for its Argentine subsidiaries and has now made provisions for its entire Argentine
investment portfolio. In Argentina Agbar owns stakes in waterworks utility Aguas Argentinas, which serves the greater Buenos
Aires area, as well as waterworks companies Aguas Cordobesas and Aguas Provinciales de Santa Fe.
- Argentine province Buenos Aires' waterworks utility Aguas Bonarenses is expected to continue serving the area's 2.5 million
residents through year-end, according to local reports. In March the province established Aguas Bonarenses to guarantee potable
water and sewerage service through August 1, after Enron-controlled water utility Azurix BA handed back its 30-year concession.
It is almost assured that Aguas Bonarenses will continue servicing residents beyond August 1 and probably through year-end,
as the country's current situation does not make launching a new auction process to hire a new concessionaire feasible, according
to reports. The country's crisis has also pushed back the tender process of the province's Salado river basin master plan,
whose first stages were expected to be put out to tender early 3Q02. The plan's largest work will likely be put out to tender
in September.
- According to Reuters, Argentina's Buenos Aires province will file a US$600mn lawsuit against US power company Enron for alleged
damages after the company's water utility Azurix handed back its 30-year waterworks concession in March. Azurix was plagued
with quality- and service-related problems. Azurix countered the province had made "serious breaches" of concession terms,
and is demanding US$150mn-200mn compensation, of the US$438mn concession rights it paid in advance and another US$100mn in
investments and operational issues.
- In late August, Argentina's Misiones province water utility Samsa qualified the four technical offers submitted in June for
a potable water plant optimization works contract for provincial capital Posadas. The companies are Dycasa, Abensur, JCR and
Ingeniero Pellegrinet. The contract entails the construction of a potable water plant and three complementary works. A reference
price for the contract was not disclosed due to the country's economic crisis that has affected pricing terms. Once the contract
is awarded, Samsa will award a second contract to expand Posadas' potable water and sewerage network. A consortium of companies
Ices and Tecma won the bidding for the second contract in October 2001, after submitting a bid for 20mn pesos. Both tenders
fall under the federal government waterworks promotion and financing agency Enohsa's US$47.1mn Potable Water & Sanitation
Reform Program (BIRF 4484). The World Bank is providing US$30mn financing for the program.
- In late August, it was reported that the public works and services department of Argentine province Neuquen's finance ministry
has extended the bidding deadline for the construction of the Chihuido II hydroelectric-water supply project to October 16
from August 22. The deadline was extended at the request of companies interested in the project. The contract entails the
construction, financing and operation of the plant for 25 years from the date of first generation, after which the plant would
be transferred to the province.
- According to press reports, plans are underway for Argentina's construction chamber - Camara Argentina de la Construccion
- to present the government a list of infrastructure works, including hydraulic projects, worth more than US$4.3bn, which
will permit the reactivation of the engineering and construction sector.
Bolivia
- Arbitration hearings regarding a request filed by waterworks company Aguas del Tunari with the International Center for Settlement
of Investment Disputes (ICSID) over a concession dispute with Bolivia are scheduled to begin September 9, Bolivian paper Opinion
reported. Tunari filed the request after Bolivia's government terminated the company's 30-year concession to provide water
services to the city of Cochabamba. It is seeking more than US$25mn in damages. Bolivian authorities rejected the compensation
claims, attributing the damages to civil disturbances after an April 2000 rates hike. The government said it cannot be held
responsible for these disturbances. England's International Water and Spain's Abengoa are majority owners in Tunari, with
respective 55% and 25% stakes. Cochabamba municipal water utility Semapa signed a 40-year concession contract with the city's
basic waterworks superintendence to manage the local waterworks system.
- At the end of July, German development bank KfW approved a 26mn euro (some US$25.5mn) loan to Bolivia to help carry out rural
drinking water, sewerage and irrigation works, according to Bolivia's state news agency ABI. Some US$22.9mn will go to drinking
water and sewerage projects in Bolivia's Chaco region, and Potosi department region Bustillos. The KfW also approved some
US$2.5mn to complete the US$24mn Comarapa irrigation project in Santa Cruz department. The project entails the 44m high La
Canada dam, three water intakes, four principal siphons, 60km of aqueducts, and other complementary works, that will benefit
2,440ha in municipalities Comarapa, Banados, Chilon, Saipina and San Rafael.
- IBNORCA, the governing board of the Bolivian Institute for Technical Norms and Standards, approved the new technical standards
for the design and construction of sewerage systems and wastewater treatment plants. This new set of standards will support
the scale-up in Bolivia of the condominial system, tested and validated by WSP-Andean Region in the El Alto Pilot Project,
in La Paz. The norms have been designed to enable other alternative, low cost systems to be developed, tested and used. The
development intends to broaden the possibilities for poor families to access better quality, more sustainable, sanitation
services. This approval is said to be the final outcome of an almost year-long process led by the Bolivian sector authority,
the Vice-ministry of Basic Services, with WSP-AND technical assistance and financial support from the Swedish International
Development Agency (SIDA).
Brazil
- In early June, Brazil's Pernambuco state and the Inter-American Development Bank signed a US$90mn loan agreement to support
sustainable development economic and social investments in the state's Mata zone. Investments will be channeled to environmental
protection, potable water and sewerage works, among other areas, which will directly benefit low-income residents and strengthen
municipal planning and management.
- The Inter-American Development Bank also approved two loans totaling US$148mn to support municipal development and infrastructure
investment in Brazilian states Parana and Para in early June. Parana will benefit with US$100mn that will help strengthen
the institutional capacity of the state's municipalities, as well provide resources for investments, including potable water,
sewerage, flood control and environmental conservation works. The new program will be carried out by Servico Social Autonomo
Paranacidade, which will study avenues of attracting private capital for municipal funding as well as other revenue-enhancing
alternatives. Para will benefit with US$48mn loan that will support the first phase of a US$166mn program to improve the institutional,
legal, and financial framework of municipal governments, enhancing the service quality and coverage. The program will provide
resources for qualifying municipalities in all sectors under their jurisdiction, waterworks and rain catchment works. Para's
state urban and regional development department Sedurb is the program's executing agency.
- The Brazilian government's special urban development department (SEDU) expects to sign a financing restructuring contract
with the World Bank in July to renew disbursements from the water sector modernization project PMSS II. Although the World
Bank approved the US$211mn project in 1998 and disbursements began in 1999, only about US$3mn from the World Bank's US$150mn
portion has been disbursed. Senate approval of a bill authorizing funds to be freed however resolved this impasse, and, following
contract signing, US$75mn will be available from state bank Caixa Economica Federal (CEF). PMSS II aims to strengthen regulations;
increase private sector participation in investment and management; improve overall efficiency; and increase coverage, while
improving the quality of water bodies in states and municipalities served by participating utilities. The World Bank is providing
60% of the funds, while 40% comes from participating utilities. Although SEDU is the executing agency, utilities are responsible
for launching goods and services acquisition tenders.
- In June, Brazil's senate approved a US$240mn Inter-American Development Bank loan for the second phase of the government's
US$400mn tourism development program Prodetur II, which will benefit 11 states in the northeast. Prodetur II is focusing on
solid waste management and water and sewerage systems, as well as road improvement and expansion and other transportation
infrastructure. Prodetur II will also require a number of studies to encourage the private sector to finance and manage services
such as solid waste, water, and sewerage over the long term.
- Goias state water utility Saneago hopes to sign a contract in September with the consultant that will draw up bidding rules
for the process of bringing in a private sector operator. Saneago is also waiting on the finance ministry's national treasury
department to green light a US$47.6mn Inter-American Development Bank waterworks loan, after which the national congress will
have to give its approval. The IDB loan will be applied towards a US$95.2mn project - with local counterpart funds providing
the balance - that aims to provide year-round, 24-hour drinking supply service to 90% of users in state capital Goiania by
end-2007, and to improve sewage treatment, reducing pollution in the rivers draining the service area and setting the framework
for further expansion of the potable water system. The project includes construction of an impoundment dam on the Joao Leite
River, from where an 11.8km conveyance system will transport water to the Jaime Camara treatment plant. Work on the dam started
earlier this month and completion is scheduled for 2004. Saneago plans to invest US$78.6mn this year and US$242mn over the
next five years.
- In June, Rio de Janeiro state sanitation and water resources department SESRH opened the economic offers of the six companies
vying for a contract to manage the US$793mn Phase I of the Guanabara Bay remediation program (PDBG), according to local reports.
The winner of the new 26-month contract will take over PDBG's first phase, for which the Inter-American Development Bank is
putting up US$350mn, the Japan Bank for International Cooperation US$237mn and Rio state US$206mn. Phase I is scheduled to
run through 2003 and has five components: 1) potable water and sewerage works; 2) solid waste management; 3) river drainage
and channeling works; 4) digital mapping; and 5) complementary works, such as facility upgrades and personnel training.
- A workers' party (PT) government in Brazil would increase state investment in waterworks, power generation and oil, according
to an 84-page document that would form the basis for the party's program. Business paper Gazeta Mercantil quoted PT deputy
Jorge Bittar as saying the party would increase the power of state companies and the government's role in the economy in order
to recover the state's planning capacity. "We don't exclude the private sector, but the market cannot resolve everything,"
according to Bittar. The PT, whose candidate Luiz Inacio "Lula" da Silva leads polls ahead of October elections, would closely
monitor regulatory agencies created by the government in recent years, with unions, universities and consumers having the
power to influence policy of such agencies. In regard to waterworks, the party would put up funds to enable cash strapped
state waterworks companies to invest in water and waste systems. Rather than selling off these companies, the PT would like
to see them working in partnership with private companies in the sector.
- Brazil's Federal District (DF) waterworks company Caesb expected to have a waterworks master plan ready at the end of August
that will guide planning for the next six years, according to reports in the local press. The master plan is part of a US$260mn
basic waterworks program for the DF, which includes capital Brasilia and surrounding areas. The Inter-American Development
Bank is providing US$130mn, while local funds account for the remaining US$130mn for the plan. Meanwhile, Caesb will make
available bidding rules August 1 through September 16 for an international tender to carry out drinking water supply works
in the DF's Lago Shil area.
- In August, Sao Paulo water utility Sabesp and the country's national development bank BNDES signed a 240mn reais (US$80.7mn)
financing contract. The funds - which also come from local banks Alfa, BBA, Itau and Unibanco - will help finance Sabesp's
US$400mn Tiete II project to expand water collection services to 1.2 million people in Sao Paulo city and reduce pollution
in the Tiete and Pinheiros rivers. The Inter-American Development Bank is also providing financing. BNDES has also approved
160mn reais to help Sabesp carry out a 697mn reais wastewater collection and treatment project in the Baixada Santista region.
The Japan Bank for International Cooperation has approved US$150mn for the project.
- In August, the Inter-American Development Bank visited Brazil's Ceara state water utility Cagece to discuss details of a US$100mn
loan that would help finance the second phase of the utility's US$200mn waterworks master plan Sanear. The loan could be inked
in December according to a report in local paper O Povo. The five-year plan has two components, the first of which entails
building a sewerage network in capital Fortaleza to increase coverage to 77% from 52%, and the construction of collectors
in the Maranguapinho and Coco river basins. The second component involves building drinking water systems and sewerage networks
in 12 and 18 localities respectively in the state's interior.
- In early August, some 50 companies and consortia purchased pre-qualification guidelines from Parana state water utility Sanepar
for a 200mn reais (some US$69.6mn) water supply and sewerage works package for Parana state capital Curitiba's metropolitan
region. An evaluation committee will now draft a short list of pre-qualified companies/consortia that will be invited to bid.
These works fall under Sanepar's US$390mn water and sewerage program Paranasan, which Japan's Overseas Economic Cooperation
Fund and local funds are financing. Paranasan is the state's largest waterworks project and focuses on Curitiba and the coastal
region. Sanepar's voting shares are held 60% by Parana state, and 39.71% by Domino Holdings, a company formed by Vivendi Environnement,
Andrade Gutierrez Concessoes, Opportunity Dalleth and Copel
- Brazil's Pernambuco state water utility Compesa will have to invest some US$780mn in the next 15 years to reach 99% drinking
water coverage and 45% sewage collection and treatment service, according to the country's national development bank BNDES.
The state government is reviewing its options in order to come up with a way to finance this investment, one of which could
include World Bank funding, according to local press reports in August. Investment was to have been pushed forward with Compesa's
privatization that was scheduled for last year. Although Compesa, along with Bahia state's Embasa, Rio Grande do Norte's Caern
and Espirito Santo's Cesan, fall under BNDES' 2001-2002 privatization program (PND), plans to sell off these utilities have
been put on hold due to political pressures and a pending waterworks sector regulatory bill under debate in congress.
Chile
- Chile's central Region V waterworks company Esval issued some US$98mn in bonds in mid-June. Santander Investment acted as
the placing agent. The bonds were issued in Chile's inflation-indexed currency, the UF, with 75% used to pre-pay debts and
the remaining 25% for new investment. Last month, local credit rating agency Feller assigned its 'AA-' rating and stable outlook
to the bond issue, due to Esval's monopolistic position and the technical and financing backing of British parent Anglian
Water. Esval plans to invest some US$135mn in 2002-2003, which would help bring wastewater treatment to 93% and increase potable
water and sewerage coverage close to 100% by end-2003. The company's annual sales reach US$73mn.
- Basic engineering studies for the US$152mn Punilla dam concession on the Nuble river in Chile's Region VIII should conclude
by year-end, according to local reports. Chile's public works ministry's concessions coordination office will call for bids
in 2003 once corresponding engineering and environmental impact studies are approved. Meanwhile, the concession office is
considering awarding a concession for the US$260mn construction of two dams in the Aconcagua basin in Region V. Bids for detailed
engineering studies will probably be called in August; the engineering contract would be awarded by year-end; and the construction
tender would be launched in 2003. The US$152mn Catemu dam would have a 250 million cu. m capacity, for irrigation of the lower
part of the Aconcagua river, to the northeast of the city of San Felipe. The second dam is the US$108mn, 100 million cu m
Puntilla del Viento, which will irrigate the upper area of the Aconcagua river, 20km northeast of the city of Los Andes.
- The concessions office of Chile's public works ministry is considering tendering the US$110mn concession of the Convento Viejo
reservoir in its 2003 projects portfolio, according to local reports. The call for bids is timetabled for October; bids will
be received 1Q03 and the concession will be awarded in 2Q03. The five-year construction period is scheduled to begin in 2004,
and the concession is for 30 years. Investment, and the size of the dam, has been scaled down to US$110mn from US$210mn with
less land expropriation and associated channeling. The reservoir will be used for irrigation and has tourism and power generation
potential. Convento Viejo is 15km south of Chimbarongo in central Chile's Region VI.
- Chile's government is studying submitting a bill to congress that would, among other issues, oblige water utilities to be
responsible for rain catchment in urban areas, according to local reports. A second alternative would be the creation of rain
catchment concessionaires that would be tasked with the investment, operation and maintenance of rain catchment systems in
exchange for a rate that would be paid by users. Although more than US$240mn has already been spent on rain catchment infrastructure
for Santiago, another US$630mn is needed for primary collectors alone and US$1.5bn nationwide.
- Chilean water industry executives called on authorities to relax concession rules at a conference in capital Santiago in July
as the country enters a second phase of introducing private capital into the industry. Rates are the acid test of Chile's
water sector privatization process, which is now entering the second stage. With five utilities now privately owned and a
sixth in an operating concession, private sector operators need to prove that their operating efficiencies will enable them
to reach lower rates over time.
- The Chilean government is moving forward with its private sector participation plan, this time in the southern part of the
country. The concession involves the provision of water and sewerage services in the Araucania, Aysen and Magallanes regions.
Based on the previous failure by Essar, the most appealing company, to attract international private water companies, the
government is offering the three water utilities (Essar, Emssa y Esmag) as a single package. According to local press, 16
companies have shown interest in the 30-year concession project. According to people familiar with the details of the project
Essar expects to invest approximately US$ 188M mainly on the construction of new water treatment infrastructure.
- In early August, Chile's state companies administrator SEP green lighted the start of the concession process for state-controlled
water utilities Essat (Region I), Essan (II), Emssat (III) and Essco (IV). A timetable for the utilities' concession process
has yet to be defined. The four companies are the remaining state-controlled water companies to begin the process of incorporating
private capital under the concession scheme.
- Aguas Andinas made bidding rules available August 5 for a tender to design, build and put into operation a wastewater treatment
plant for the area covering Metropolitan Region (RM) towns El Monte, El Paico and Lo Chacon, Aguas announced. Offers are due
and will be opened September 13, with bidding open to companies registered with the country's public works ministry. Spain's
Agbar and France's Suez control 54.2% of Andinas, while the Chilean government's industry development arm Corfo owns 44.2%
and workers and other shareholders the remainder.
- Iberdrola is pulling out from Essal on which it has 51 % stake. Long-time players in the water industry, Thames Water and
Anglian Water, are said to be the prospective bidders for that stake. Essal serves the X Region in Chile. People close to
the negotiations have said that the same players are to bid for Essat, which serves the IX Region, to be tendered for concession
in September. In the meantime, Thames' Essbio has begun a road show to issue A-type bonds worth US$1m, and B-type bonds worth
$1.7m in an effort to secure financing for $175m of investment for the period 2002 - 2006. Most of the financing will be used
to construct sewage treatment units at Concepcion and Los Angeles.
Colombia
- Colombia's government and the Andean Development Corporation (CAF) signed a US$200mn loan agreement in June to help carry
forward Colombia's 1998-2002 public investment plan, government news agency Ancol reported. The 10-year loan will complement
and bolster previous CAF loans and focus on supporting sustainable infrastructure works in priority areas such as potable
water and sewerage, environment (river basin recovery and preservation), transport, community development, agro-industry,
and others. The public credit general directorate of the finance and public credit ministry will be the loan's executing agency.
Ten percent of the funds will go directly to the waterworks sector. Beneficiaries will be urban and rural zones cataloged
by Colombia's government as lacking basic infrastructure.
- Bogota's municipal water utility EAAB announced in July that it will invite bids for contracts to manage service operations
in five zones of some 1.5 million inhabitants each. The contracts seek to improve service, shorten response times and increase
efficiency.
- Colombia's environment and economic development ministries and the national planning department, DNP, are preparing a study
into how to secure US$2.7bn to complete an up-to-US$3.4bn waterworks investment program, the government announced in July.
The DNP's economic and social policy council, Conpes, has drawn up a series of guidelines for a national wastewater management
plan, which estimates that up to 300 towns and cities could meet the newly defined criteria for having a wastewater treatment
plant. Investment in 300 plants would be US$3.4bn, but authorities estimate that only US$700mn is available over the next
10 years, prompting the discussions. Possible sources of financing are the state, the national royalties fund, resources from
municipalities that would benefit from the projects, loans, resources from the country's network of development corporations
(CARs) and higher rates.
- Colombia's Bolivar department water utility Aguas de Cartagena (Acuacar) has extended to November 20 from October 22 the deadline
to submit bids for the supply of piping and accessories related to a US$117mn water supply, sewerage and environmental management
project. The tender is split into three groups of piping and accessories: ductile forged iron piping with mechanical joints
for water supply works; concrete piping for sewerage lines; and ductile forged iron piping with mechanical or reinforced glass
fiber joints for pressurized sewerage lines. The World Bank is providing US$85mn for the waterworks and environmental management
project, while the national government (US$20mn), Bolivar department capital Cartagena (US$7.6mn) and Acuacar (US$4.6mn) are
providing the balance. Cartagena authorities own 50% of Aguas de Cartagena, while Spain's Agbar has 44.8%.
Costa Rica
- New appointees in Costa Rica's Acueductos y Alcantarillados ("AyA"), the water authority, support the privatization process
initiated by their predecessors. However, the new management is said to be discussing with lower managers the future role
of the private operator. In an effort to modernize the wastewater service infrastructure in the San Jose metropolitan area,
the Costa Rican government has launched a privatization process through which it intends to grant a BOT concession to a private
operator covering the whole area. The project includes the construction of a treatment plant, expansion and modernization
of existing collectors and the refurbishment and expansion of the secondary water network. The project is said to be worth
US$ 281M and, apparently, IDP and other commercial banks will provide the financing under an A/B loan scheme.
Dominican Republic
- The Dominican Republic's potable water and sewerage service will not be privatized, President Hipolito Mejia said during a
speech in July, in which he announced that the government would establish special water supply rates for low-income areas.
President Mejia removed a 3bn peso (some US$182mn) loan package bill from congress that was to have gone to the construction
of the Alto del Yuna multi-use dam project, local paper Hoy reported. "They [the towns] told me they didn't want to borrow
money, so I removed all [the projects]. Let the towns fight for their things," Hoy quoted Mejia as saying. Mejia added that
alternatives include pulling water from the Rincon dam, from underground or building a water plant. Norwegian bank Eksportfinans
was going to finance the project, and a Norwegian firm was already contracted to build the project. The irrigation, water
supply and hydroelectric dam would be built on the Yuna river and also be supplied by rivers Tireo and Blanco, as well as
the Avispa stream. Construction would take four years to build and supply water to eight communities in the country's northeast,
as well as irrigate 150,000ha and generate 251.3GWh/year of electricity. The government's national water resources institute
INDRHI is the dams' executing agency. Earlier in August, Mejia announced that 16 bills for loan packages worth a total of
US$1.6bn and signed with governments and international entities had been removed from congress, including US$400mn offered
by an Italian firm to carry out rehabilitation and recovery work on the Ozama and Isabela rivers.
Ecuador
- Studies into the feasibility of incorporating the private sector into Ecuador's waterworks sector are pending October's Presidential
election, according to local reports in August. There are six processes underway, and the utilities are waiting for elections
to finish before going ahead with definitive studies. The country's constitution calls for modernizing state owned companies
by bringing in the private sector. In Manabi province city Manta, four international companies are competing to carry out
studies regarding the financial feasibility of incorporating the private sector in utility Eapam. Manta has some 200,000 residents.
In Guayas province, utilities Aguapen - which serves Salinas, Santa Elena and Libertad - and Hidroplayas - which serves Playas
and Posorja - will soon launch a tender to carry out definitive studies. Close to 200,000 residents live in the area. In Pinchincha
province, studies for city Santo Domingo's water utility Emapa are expected by year-end, while Conam is waiting on capital
Quito's Emaap to submit the final documents required to carry out studies. Meanwhile, processes for Los Rios province capital
Quevedo and Azuay province capital Cuenca are on-hold. One utility in Ecuador is already in private sector hands: Guayaquil's
Ecapag, which is now operated by the Interagua consortium under a 30-year concession.
- Ecuadorian capital Quito's waterworks utility Emaap will publish a general acquisitions announcement August 16 to carry out
a series of potable water and sewerage works valued at US$15mn-18mn, according to local reports. Bidding rules will follow
late August or early September, the official said. The works fall under a US$50mn environmental sanitation project for the
capital, which aims to reduce the vulnerability of urban zones affected by flooding, landslides and mudslides, as well as
improving potable water and sewerage coverage and Emaap's efficiency and financial capability. Emaap and the Inter-American
Development Bank are expected to sign a US$40mn loan for the project in September, once the government approves its role as
guarantor, which is expected in the next few weeks, said the official. The project's second phase is estimated at US$60mn,
which would be made up of a US$48mn IDB loan and US$12mn in local funds.
Honduras
- The European Union (EU) has signed contracts with Honduras' national waterworks utility Sanaa to help finance a US$24mn waterworks
project through the EU's Regional Program for the Reconstruction of Central America (PRRAC), local paper Tiempo reported in
July. The four-part project will take five years to carry out and will benefit 28 marginal neighborhoods in capital Tegucigalpa
by expanding the potable water system; rehabilitating and expanding the primary and secondary sewerage network; and building
a wastewater treatment plant, which will reduce the amount of pollutants that go into the Choluteca river. The project will
benefit more than 100,000 residents and falls under the EU's 250mn euro (US$247mn) PRRAC, created in 1998 to rebuild damaged
infrastructure following hurricane Mitch. Sanaa operates 32 water distribution systems in the country's principal cities.
The PRRAC expects to launch the tender for a US$24mn waterworks project in January. Companies from the EU and PRRAC beneficiary
countries - Honduras, Nicaragua, El Salvador and Guatemala - may participate and construction is slated to begin September-October
2003.
Jamaica
- In July, Jamaica's government approved a 6.5bn Jamaican dollar (some US$134mn) bailout for the country's debt-burdened National
Water Commission (NWC). The government approved the conversion of some US$72.3mn in loans to the NWC - for capital projects
- into grants after recognizing that the commission's rates were never sufficient to recover capital cost, according to local
paper The Jamaica Observer. The write-off comes a few months after the country's utilities regulator turned down a request
from the NWC to charge customers a levy to provide it with additional funds to carry out what it said were capital projects,
according to the paper, adding that the NWC also had outstanding payment of pension contributions for employees.
- In the third week of August, the NWC began accepting expressions of interest next week from companies interested in pre-qualifying
for a 39mn euro (some US$38mn) water and sewerage project in Portland parish city Port Antonio. Companies will have 45 days
to submit background documents, after which the NWC will short list 4-6 companies that will be invited to submit offers. The
European Investment Bank has approved a 15mn euro (US$14.9mn) loan to help finance the two-phase project. Phase I will be
completed by end-2003 and will include drainage improvement, water distribution, piping improvement and the building of new
sewers. Phase II is slated to begin 2004 and should be completed by end-2005, and entails the involve completion of the drainage,
water production and the sewage pumping system.
Mexico
- In early June, Mexico's national water commission CNA presented a US$159mn water resources management project for the Conchos
River basin to the lower house's hydraulic resources committee, local paper El Norte reported. The CNA would finance the four-year
project to introduce water-saving irrigation technologies and relining supply channels, thereby decreasing water loss from
filtration and evaporation by almost 400 million cu. m., This would help narrow Mexico's water supply debt with the US, and
the project will be presented to US authorities within two weeks. The project's budget would be divided in four phases: US$69mn
this year; US$47mn in 2003; US$18.6mn in 2004; and US$24mn in 2005, he said. The 3,536 sq. km basin area is in Chihuahua state.
- In July, the US and Mexico reached an agreement on the management of the international waters of the Rio Grande valley, the
International Boundary & Water Commission said in a statement. The agreement aims to maintain a balance between meeting the
water supply needs of the border communities and farmers, as well as fulfilling the obligations established between both countries
under a 1944 treaty relating to water utilization from the Colorado, Tijuana and Rio Grande rivers. The agreement's principal
goals are modernization of the hydrological infrastructure, with the goal of achieving greater water use efficiency; the endorsement
of a bi-national financial package dedicated to water conservation initiatives; and the assignment on a contingency basis
by Mexico to the US of 90,000 acre-feet of water from international storage.
- In early July, Mexican waterworks company Asim acquired five waterworks concessions from US-based Azurix for approximately
US$93mn, financed in local currency, according to France's Ondeo, a partner in Asim. US power company Enron owns Azurix. Asim
is a 50/50 joint venture of Ondeo and Mexico's Industrias Penoles. The acquisitions represent a total of US$70mn in annual
revenues, Ondeo said, adding that the Cancun contract, for which 60% of future revenue is backed by US dollars, will immediately
be earnings-accretive. The purchase covers a 30-year concession contract in coastal city Cancun signed in 1993, a services
contract for a quarter of Mexico City and three BOT (build, operate, transfer) contracts for sewage projects in the cities
of Leon, Torreon and Matamoros, all located in Guanajuato state. In Cancun, Asim will takeover Azurix's stake in Desarollos
Hidraulicos de Cancun (DHC) and provide waterworks service to 430,000 residents.
- Mexican water utility Cespm, which serves Baja California Norte state capital Mexicali, launched in late July an international
pre-qualification call for a turnkey contract to design, build, supply, operate and maintain drinking water plants. Pre-qualification
guidelines are available through August 12, inquires will be received through September 2 and answered by September 14, and
company background documents are due October 1. Cespm will then invite pre-qualified companies to submit bids following approval
from the Japan Bank for International Cooperation (JBIC), which is helping finance the works under a loan agreement signed
between Mexico and JBIC in 2000. The timetable for the bidding stage will be released at a later date. The JBIC and local
counterpart funds are providing US$176mn to Cespm, as well as Tijuana water utility Cespt to finance works. Baja California
Norte water commission CEA is coordinating the JBIC-funded hydraulic infrastructure works project, and expects work to be
completed by end-2004, although the final deadline is 2006.
- The World Bank approved a US$202mn loan in early August to support efforts to promote sustainable development in Mexico through
balancing socioeconomic development with environmental management. The funding is a structural adjustment loan, meaning it
will not support particular investment projects, and is furthermore classified as programmatic, meaning it is the first operation
of several potential funding programs. Resources will support the first stage of the federal government's program to improve
effectiveness and efficiency of local environmental management through decentralization, greater consistency between state
and federal standards, and adequate financing for local investments and capacity building, the World Bank said in a statement.
Regarding water, funding would support, among other areas, the decentralization of the sector and helping municipalities pay
for their water use; municipalities account for 55% of water use by volume in Mexico.
- Mexico's Coahuila state capital Saltillo water utility Aguas de Saltillo plans to build a US$30mn, 1,000 liter/second wastewater
plant, local paper El Norte reported. The country's national development bank Banobras will finance 40% of the plant, while
Aguas will finance the remainder, either with its own funds or securing some type of loan, and the option of charging users
has not been ruled out. Land acquisition is expected in a month with a tender launch expected afterwards and contract signing
slated for year-end. Last year, Saltillo awarded Spain's Agbar a 25-year concession to operate Aguas de Saltillo, which serves
some 650,000 residents. Agbar has a 49% stake in Aguas, while Saltillo has the remaining 51%.
- Mexican city Veracruz needs some US$204mn to replace the city center's antiquated drainage network, regional water and sanitation
commission director Anthar Angel Kuri Huerta said. Although Veracruz currently lacks the financial resources to carry out
the replacement works, these must be gradually carried out in the next five years according to reports in local paper Diario
de Xalapa. This impasse could be overcome through by bringing in the private sector under a concession scheme and the municipality
could take advantage of the national water authority's (CNA) waterworks sector modernization program Promagua. Promagua is
a federal subsidies program designed to attract private investment to water projects in cities with populations over 50,000
inhabitants. Under the program, local authorities can apply for subsidies of up to 65% of the cost of a specific project.
The remainder is expected to come from investors.
- Two US companies and three Japanese companies are vying for a consultancy contract to draft the tender process to build four
wastewater treatment plants in Mexico's Federal District (DF), DF hydraulics construction and operation general director Antonio
Dovali Ramos told the press, without disclosing names. The five companies were short listed following a pre-qualification
call in 1998, said Dovali, adding that a winner is expected by year-end, while international tenders to build the plants under
design, build and operate contracts are slated for end-2003. The plants fall under the Mexico Valley metropolitan area (ZMVM)
sanitation program, funds for which have been idle since 1995 due to local infighting and lack of planning. The Inter-American
Development Bank is providing US$365mn, the Japan Bank for International Cooperation US$410mn and local funds US$260mn to
finance the program.
- In late August the North American Development Bank's (NADB) board of directors authorized the creation of an US$80mn Water
Conservation Fund (WCF) for financing water conservation projects on the US-Mexico border. The WCF will help finance infrastructure
improvement projects for irrigation districts impacting the Rio Grande, and will be capitalized with a portion of the NADB's
retained earnings. The board also authorized an additional US$50mn for the NADB's low interest rate lending facility (LIRF)
in anticipation of increased lending demand, as well as US$7.05mn in loans and grants for projects in Coahuila state city
Acuna and Sonora state town San Luis Rio Colorado. The board approved a US$5.3mn LIRF loan for Acuna water utility Simas'
US$78.8mn comprehensive sanitation project. The three-phase project will be carried out over 20 years and entails the construction,
rehabilitation and expansion of primary and secondary sewer systems, as well as the construction of a wastewater treatment
plant.
Nicaragua
- Nicaragua's national legislative assembly approved a law in late August that prohibits the privatization and/or putting out
to concession of state water utility Enacal's functions.
Panama
- Panama's state water utility Idaan has qualified the technical offers of three companies/consortia of the four that delivered
technical and economic offers for a contract to expand the capacity of the Chilibre potable water plant to 220 million gallons/day
(mgpd) from 120mgpd. Meanwhile, nine companies/consortia have submitted technical and economic offers for a second contract
that entails optimizing distribution networks, including leak control and a registry of users and networks. A total of some
US$70mn will be needed to carry out both contracts.
- The US Trade & Development Agency (TDA) should call for offers in August to carry out an additional study for the US$380mn
Panama City & Bay sanitation master plan, according to local reports. In May, the TDA approved some US$517,000 to help finance
the complementary study. The TDA and the ministry should sign the financing contract by month-end, after which the contract
will be put out to bid for US companies. Meanwhile, the ministry expects to submit in the next few days to the Inter-American
Development Bank (IDB) documents to carry out an additional study that entails the design of the plan's wastewater collection
network. Funds for the studies come from a previously approved IDB loan. The IDB and the Japan Bank for International Cooperation
have scheduled an appraisal visit in August, where it is expected they will decide whether to continue financing negotiation
talks. The US$380mn plan aims to clean up the capital's waterways and bay by expanding the current wastewater/sewage collection
network; rehabilitating and building new interceptors and pumping stations; and building wastewater/sewage treatment plants,
as well as tackling maritime, industrial and residential solid waste. Entities participating in the project include Panama's
national environment regulator Anam, the health ministry and state aqueduct and sewage company Idaan.
- The three companies that submitted offers to Panama's state water utility Idaan in June for a contract to expand the Chilibre
potable water plant resubmitted offers in early August in a second bidding attempt, according to local reports. The prospective
contractors are: Company Constructora Urbana (CUSA), Tecnicas Reunidas de Panama and The Roberts Filter Group, which in June
submitted bids of $52.5mn, US$58.8mn and US$54.4mn respectively. Idaan's reference price for the contract was US$55.3mn. The
first attempt was scrapped after allegations regarding irregularities in the selection process surfaced. Technical offers
were opened, while economic offers will be opened once an evaluation committee issues a report in 10 days.
Paraguay
- In June, Paraguay's senate indefinitely postponed the implementation of a law that authorized the privatization of water utility
Corposana, as well as telecoms utility Copaco and railroad FCPCAL, due to political pressure. It is doubtful the privatization
process will continue under the current government, and what will probably occur is that Corposana will be put out to concession
rather than being sold outright, an official from the privatization department (SNRE) was reported as saying in local reports.
Presidential elections are slated to be held April-May 2003, with a new administration scheduled to take office in August,
the official commented. Offers for Corposana had been scheduled to be opened June 27, after the SNRE qualified five of the
six companies/consortia that submitted background documents for Corposana's privatization in April.
- In late July, Paraguay's reform minister Oscar Stark Robledo said that operations of state water utility Essap could be offered
under management contracts. Essap was slated for privatization but the senate, faced with political opposition, scrapped the
sale in June.
Peru
- Peruvian water utility Sedapal will invest US$60mn-65mn this year in its Lima concession area, executive president Jesus Zamora
said in an interview with newspaper Gestion. Sedapal is state owned. Investment in the last 10 years has been US$1bn and required
investment in the next 30 years is some US$2.3bn-US$3bn. In late August local press reported that Sedapal is seeking US$20mn
from the World Bank to serve low income and periphery areas. Sedapal will submit documents in September and expects the loan
to be approved 4Q02 and implemented next year.
- The waterworks department of Peru's transport ministry expects the World Bank to approve a US$50mn loan in August for a US$75mn
rural water supply and sanitation project (Pronasar), according to local reports. The Cabinet has approved the financing operation,
which opens the way to launch tenders after the World Bank approves the loan. Pronasar aims to increase the sustainable use
of new and rehabilitated water supply and sanitation facilities in rural areas and small towns.
- Privatization regulator Proinversion planned to hire a financial advisor in August for its search for private sector operators
to take on 30-year concessions for water utilities serving the northern cities of Tumbes and Piura. The two municipally owned
companies, EPS Grau (Piura) and Emfapa Tumbes are bankrupt due to mismanagement, with only 55% of water billed and half that
paid for, amid water losses, low coverage, intermittent service and poor productivity. Proinversion will set rates and service
requirements, which in turn will define necessary investment over the life of the concession, rather than awarding based on
the highest bids, given the need to drastically turn round the companies' finances and increase service. Investment in EPS
Grau is estimated at US$221mn and in Emfapa Tumbes at US$50mn. Exactly when the concessions will be offered depends on the
advisor's findings and the signing of a loan from the Inter-American Development Bank designed to strengthen regulatory capacity
and private sector participation in all sectors of the economy.
- Proinversion has extended the deadline to purchase bidding rules for the Olmos irrigation and hydroelectric concession project
in Lambayeque department to September 13 from August 5. European companies interested in Olmos requested the extension due
to Europe's holiday season according to local reports. The October 21 deadline to submit offers remains. A winner is scheduled
to be announced in November and would operate the project under the terms of a 40-year concession. A legal instrument was
confirmed this this week authorizing the government's share of project financing to US$77mn from US$40mn. In May, China Electric
Power Technology Import & Export Corporation (CETIC) and a Peru-Ecuador-Argentina consortium of Construccion y Administracion-Hidalgo
& Hidalgo-CONIVIAL purchased pre-qualification guidelines. The seven pre-qualifiers to date are Sweden's Skanska, Italy's
Impregilo, Brazil's Norberto Odebrecht, Argentina's Jose Cartellone, Hispano-German consortium OHL-Zublin, and France's Suez,
GTM Dumez and Bouygues. The project entails pulling water from the Huancabamba River, whose US$300mn first phase is estimated
to take 4-5 years and would benefit close to 60,000ha and generate 2,400GWh/year.
Puerto Rico
- Ondeo, the waterworks division of France's Suez, will begin a US$4bn, 10-year waterworks operations and maintenance contract
for Puerto Rico's state water utility AAA in early June. AAA awarded the contract in early May to Ondeo, which secured the
contract in conjunction with its US subsidiary United Water.
Uruguay
- Six companies submitted offers to Uruguay's state water utility OSE in June for an international tender to carry out water
loss control works in the cities of Salto and Artigas. Works include inspecting and replacing main water valves, substituting
10km of temporary piping with permanent piping, repairing visible leaks, and inspecting and carrying out a survey of residential
connections.
Venezuela
- Venezuela's state-owned heavy industry holding CVG and the government of Bolivar state - including the 11 municipalities that
make up the state - agreed in June to push forward plans to seek a private partner for local water utility Aguas Bolivar,
government news service Venpres reported. The local or foreign investor would help Aguas Bolivar make the necessary substantial
investment in potable water infrastructure. Some US$250mn is needed to repair the region's 162 urban and rural aqueducts.
Through its Aguas do Amazonas utility, French holding Suez' waterworks arm Ondeo agreed to help Venezuelan water utility Aguas
Bolivar in its search for a private partner. The search for a private partner falls under a memorandum of understanding signed
between Aguas do Amazonas and Aguas Bolivar to provide technical support.
- Venezuela's environment and natural resources ministry expects to publish bidding rules in October for a US$167mn ongoing
project to install wastewater treatment infrastructure in the Lake Valencia area, according to local reports. The tender falls
under the project's portion that will be funded with US$40mn from the Andean Development Corporation (CAF). Other funding
comes from local sources (US$64mn), the Inter-American Development Bank (US$50mn) and the UK's Halcrow Group (US$13mn), which
was used an intermediary financing institution.
- Venezuela's environment and natural resources ministry will launch a tender process to carry out works for the construction
of a 200km aqueduct in Falcon state, according to local reports. The Bank of China will help finance the aqueduct's construction,
whose first phase will cost some US$100mn, which is 70-80% of the project's total cost. Falcon state water utility Hidrofalcon
- controlled by the country's waterworks sector administrator Hidroven - is helping coordinate the project, and will operate
the system once it has been completed.
- The Inter-American Development Bank (IDB) will disburse some US$684mn in new loans to Venezuela in the next few years, which
will help finance the construction of rural aqueducts, among other projects, the IDB's Venezuelan representative Roman Mayorga
told state news service Venpres.
- In August, the environment, natural resources and territorial planning committee of Venezuela's national assembly postponed
to October the submission of a water regulatory framework bill to the full assembly for a second review. The assembly reconvenes
in September. The bill aims for the preservation, protection and sustainable use of the country's water resources, and specific
measures seek to update and group together legislation, and fill gaps to give the country's water regulatory framework more
transparency, the lack of which has limited large-scale waterworks infrastructure, in particular water pollution mitigation
works. It would also tackle irregular water use by focusing on those that use water without the corresponding rights and/or
dump untreated wastewater, as well as increase public participation in water management decisions, and coordinate and strengthen
efforts among different water-related public and private institutions.
Upcoming Conferences
- Chilean capital Santiago will host environmental expo Ecoeficiencia November 20-21 at the April 11-12 at the Mapocho event
center where companies will be able to showcase their environmental goods and services. Chile's environment equipment and
services industry association AEPA and national environment authority Conama are sponsoring the event. For more information
contact chormazabal@mercurio.cl.
- The US Ex-Im Bank and Mexico's national development bank Banobras will host a conference in Mexico City September 23-24 to
explore ways to finance US exports to develop Mexico's environmental infrastructure: renewable energy, water supply and waste
management. For more information contact the Ex-Im Bank's Bo Ollision at telephone (202) 565-3546 in Washington D.C.
- Border Roundtable on Integrated Water Resources Management, Scottsdale, Arizona December 3-4, 2002. This roundtable will focus
on the challenges facing the Southwest border region and northwest Mexico in dealing with their common water resource management
issues, particularly relating to opportunities for the private sector to develop new sources of urban water supply and contribute
to irrigation efficiency. Panelists composed of private sector representatives, as well as regional, state, municipal and
federal authorities will address plans for desalination, conservation incentives, new infrastructure investments, and the
need for bilateral cooperation on modeling and planning. Organizer: Institute of the Americas, http://www.iamericas.org For
more information contact Carol Graves Tel. +1 858 453 5560 Ext. 107.
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