- From: Vol 11, Issue 2 (February 2010)
- Category: Need to know
- Region: Unspecified
- Country: Algeria, Bulgaria, China, Egypt and France
- Related Companies: Biwater, Eaux de Marseille, Suez Environment and Veolia
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* Business has boomed these last five years for water technology companies and private project developers, but water operators have had a tougher time of it.
The main advances have been in China, and the Middle East and North Africa region. Elsewhere, it has been a long battle to stand still. Now we are starting to see contracts under pressure in North Africa. Société des Eaux de Marseille has been given two months to improve its performance in the Algerian city of Constantine, or its contract will be terminated (see story p12). In Algiers itself, Suez Environnement is still negotiating the extension of the five-year management contract which came to an end in December. By all accounts, the French company has done a good job – with knowledge transfer being a key performance indicator. Is this the new reality of management contracts: do the job too well and they don’t need you any more, do it too badly and they throw you out?
* Meanwhile in Morocco, Veolia is feeling queasy about rising bad debts from government customers served under its concessions in Rabat-Salé (Redal) and in Tangiers and Tétouan (Amendis) (see story p8).
* One of the factors putting pressure on foreign companies has been the rise of economic nationalism. In Algeria, for example, the government introduced a rule capping foreign participation in local companies at 49% last summer. Now it appears to be applying the rule retroactively to Biwater’s Oued Sebt desalination project, which was awarded but not financed before the July deadline (see story p9).
* It is not all bad news from North Africa. Over in Egypt, aqualia closed the financing for the New Cairo wastewater treatment contract – the first major public-private partnership in the country (see story p12).
* The next market to open up to private water concessions looks set to be Bulgaria. With unaccounted-for water standing at 60% of total supply, the government is looking to establish 48 concessions across the country by the end of 2011 (see story p14).
* Back at home, Veolia and Suez Environnement are pitted against each other for the biggest water contract in Europe, serving 4 million people in the Ile-de-France region, which surrounds the city of Paris. The other consortia bidding for the contract have dropped out (see story p17) and now it is just the big two slugging it out. The winner will be the one who is prepared to sustain the biggest initial losses on the project. It sounds horrendous, but this is the whole justification of private operators. Whereas public operators have no one to compete against, and naturally tend towards the most comfortable modus operandi, relying on their monopoly position to cover the cost, private operators have to tear themselves apart looking for new ways of saving costs every time a contract comes up for renewal. It is only a profitable proposition if the contractors are smart enough to find efficiencies over the life of the contract that justify the initial losses.