Water Yearbook 2004-2005 Good Com

Masons Water Yearbook2004 - 2005

Masons Water Yearbook 2004 - 2005

Copyright © Masons Solicitors 2004

Published by Masons Solicitors

Masons 30 Aylesbury Street London EC1R 0ER

Telephone: 020 7490 4000 Facsimile: 020 7490 2545

e-mail: [email protected]

website: www.masons.com

ISBN 0-9537076-7-9

ISSN 1468-3954

Masons Water Yearbook 2003 – 2004 ISBN 0 9537076-5-2 Masons Water Yearbook 2002 – 2003 ISBN 0 9537076 4 4 Masons Water Yearbook 2001 – 2002 ISBN 0 9537076 2 8 Masons Water Yearbook 2000 – 2001 ISBN 0 9537076 1 X Masons Water Yearbook 1999 – 2000 ISBN 0 9537076 0 1

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner.

Whilst every effort has been made to check the accuracy of the information given in this book, readers should always make their own checks. Neither the author nor the publisher accepts any responsibility for misstatements made in it or for misunderstandings arising from it. The main text of this work reflects the information obtained by the author as at 15 October 2004.

Masons supports WaterAid WaterAid is a Registered Charity: Number 288701

PREFACE


i

The old order changeth

Of all the obstacles that routinely afflict business, none is less amenable to smooth economic management than structural change within a sector. Structural change resonates only with the law of the jungle and while perhaps not quite red in tooth and claw, savages commercial prospects we thought otherwise might be there, plays havoc with the most meticulous budgeting and precipitates flight from the sector by companies long-established in it. Change can thus erode the diversity of the supply base and jeopardise the interests of the customer. The UK market Although currently and foreseeably enjoying levels of infrastructure investment at home without parallel anywhere in the world, the UK water and wastewater industry has, paradoxically, been enduring protracted change and uncertainty for several years now in fact, since before the previous Periodic Review of Prices. This has manifested itself in boom-and-bust cycles that perversely starved companies in times of plenty. In the run-up to AMP 3 patterns of work within the industry were already undergoing change as the deadlines associated with a number of European Directives came to pass (most notably, the UWWTD) and the water companies began to move towards new forms of contractual arrangement with their long-term suppliers. “Partnering” and “framework agreements” were the new buzz-words of the age, pointing in some cases to a drastic collapse in the numbers of suppliers used directly by individual water companies. The impact universally has been very significant though mainly for suppliers. By way of example - and not untypical - one water company slashed its approved contractor list from more than 200 companies to fewer than 10. Although such measures can always be justified on the grounds of business efficiency and economics, it’s questionable whether they can be counted as sound supply base management. Multiplied across the industry, they have had a marked impact throughout AMP 3. Water companies, however, differ widely in their working arrangements, but consistency is essential for sustainable supply base capability. And while companies are increasingly looking overseas to compensate for bouts of “famine” at home, a strong and stable home market provides track record for the international market and a pool of resources, skills and expertise to draw upon. Almost simultaneously with all these shifts in working patterns was the need to re-visit designs and re-engineer schemes in order to deliver increased efficiencies. As a result, there was a sharp downturn in the opening phase of AMP 3, followed by a surge in demand before the industry settled down to more stable conditions. However, although the water companies are now somewhat better organised than at previous AMP transitions, the outlook for early AMP 4 is distinctly uncertain, with little optimism among suppliers for a transition any smoother than previous ones. Despite OFWAT’s best endeavours to facilitate the transition with the “Early-Start” programme as foreshadowed in the prior announcement of AMP 4’s first year determination the size of the programme is disappointingly low at around £1bn and few suppliers see any evidence that it has begun to see the first light of day. Significant investment is still in the offing £15.7bn up to 2010. However, with this figure (allowed for in the Draft Determination of Prices announced in July) some 25% below that asked for by the water companies, and with the Regulator setting tougher-than expected efficiency targets, margins are again under pressure and further changes in ways of working are again in train as some companies are moving towards longer-term framework agreements up to seven or even 10 years.

PREFACE


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The international market Worryingly, these patterns of change in the UK market have been accompanied by a marked slowdown (the doom-sayers would claim the prospects have dissipated!) in the international marketplace. Here the outlook for private sector participation in public water and wastewater services has shrunk on account of complex internal factors. Earlier buoyant forecasts have simply failed to live up to expectations of observers and players alike. While opportunities remain (they are potentially enormous, as the following pages attest to), they are in “dead slow” mode at present, having run up against the formidable combination of the traditional innate ultra-conservatism of municipal authorities everywhere and institutional weakness. The need, however, remains acute, particularly in the water-stressed regions of the developing world. It also exists nearer home, especially in the newly-emerging economies of central and eastern Europe, where it goes hand-in-hand with widespread environmental degradation that that remains a long-term threat to the environment generally, and water in particular. Indeed, even in the developed world there is continuing need, all too often neglected, to rehabilitate and upgrade existing water and wastewater infrastructure and on our own doorstep several countries in the EU are still a long way from implementing the Union's own environmental directives. Investment in water infrastructure, in fact, is currently running at less than half of what is needed, and a poor start is being made to the attainment of the Millennium Goal of halving by 2015 the proportion of the world’s population without access to basic sanitation. Nearly two-thirds of the required investment, moreover, will have to come from the private sector, but progress has run up against bureaucratic inertia everywhere, political indecisiveness and a much more cautious approach to investment. At the present time, institutional strengthening is simply not taking place at a pace consistent with expanding private sector participation and Millennium Goal objectives, hence, revised market expectations. The scale of need and commercial opportunity are measured out in great detail in this, the sixth edition of Masons Water Yearbook, which is now the primary source-book on the sector. It makes encouraging reading, on the one hand, for the opportunities presented on the scale of global need, while simultaneously engendering a certain air of pessimism over need frustrated for want of better political cohesion. The UK water and wastewater industry, backed by government and regulators, is one of the best equipped to facilitate this process, as outlined in the UK’s International Strategy for the Water Sector, launched in June, 2004. The Yearbook is a joint enterprise between Masons, the London-based international law firm specialising in infrastructure projects and information technology, and Dr David Lloyd Owen of Envisager, the specialist consultancy in environmental services for the water, wastewater and waste management sector. As usual it is a highly fruitful and welcome contribution to the development of the market and they are to be congratulated on its comprehensive coverage.

David Neil-Gallagher,

Chief Executive, British Water

September 2004

AUTHOR BIOGRAPHY AND MASONS WATER SECTOR GROUP


iii

Dr David Lloyd Owen David Lloyd Owen is the Managing Director of Envisager Limited, a company that advises companies, financiers and governments about water and waste management markets, strategies and environmental regulations. He was an equity analyst at UBS (Savory Milln) and BNP Paribas and founded Ecofin Limited in 1991 and has followed the water and waste management sectors since 1989. In addition to writing six editions of the Masons Water Yearbook, he has written three books on the sector in Europe and papers for peer reviewed journals. He is a member of the Pictet Funds Water Fund’s advisory board and Glâs Cymru Cyf. His publications include: 2002 The European Water Industry: Market Drivers and Responses. CWC Publishing, London 1999 Making Waves Overseas, West LB, London 1998 The European Water Industry: A country-by-country analysis Financial Times Energy, London 1998 European Water Company Profiles Financial Times Energy, London David Owen has been retained by Masons as a consultant in the water and wastewater sector. Masons Water Sector Group Masons is an international law firm specialising in infrastructure projects and information and technology law. * The firm’s Water Sector Group has extensive experience on a world-wide basis of water, wastewater, desalination and industrial water outsourcing projects, many of them procured on a BOT basis or on a Public/Privat e Partnership basis. Masons Water Sector Group also has significant experience in the field of regulatory law relating to water. Examples of recent projects include the following: • advising a UK water utility on its procurement programme relating to AMP 4;

• advising a bidder in connection with its proposed bid for a desalination plant in Taiwan;

• advising a bidder in connection with the $200 million Taweelah desalination project in Abu Dhabi;

• advising a bidder on its bid for Project Aquatrine, the UK Ministry of Defence project to outsource its water and wastewater functions under the Private Finance Initiative;

• advising on a major industrial water outsourcing project in the UK;

• advising a UK Utility Group, part of the preferred bidder consortium, on the Engineering Procurement Construction contract issues (Package 1), in connection with the design, build and operation of a water treatment plant in Beijing. Beijing No. 10 is the fourth formal BOT project in China;

• advising a member of a bidding consortium in connection with the Disi-Amman water conveyor BOT project in Jordan;

• advising part of a consortium bidding for the Dublin Bay Ringsend Treatment Works wastewater project in Dublin;

AUTHOR BIOGRAPHY AND MASONS WATER SECTOR GROUP


iv

• acting for the Government of Sri Lanka on the Greater Negombo Water PSP project;

• advising the South African Department of Water Affairs and Forestry on the form of model contracts to regulate water services for the benefit of South African municipalities;

• acting for the preferred bidder in connection with the Levenmouth Wastewater Treatment project in Scotland. This is a bond financed project procured under the UK Government’s Private Finance Initiative.

For further details of Masons’ capabilities and experience in the water and wastewater sectors, contact Mark Lane at: Masons 30 Aylesbury Street London EC1R 0ER

Tel: 020 7490 4000 DDI: 020 7490 6214 Fax: 020 7490 2545 Email: [email protected] Web: www.masons.com

* As of the 6th December 2004, Masons' merger with Pinsents will result in the new merged firm of Pinsent Masons.

CONTENTS

Masons Water Yearbook 2004 – 2005

v

CONTENTS PREFACE ........................................................................................................................i

DR DAVID OWEN BIOGRAPHY ...................................................................................... iii

MASONS WATER SECTOR GROUP .............................................................................. iii

CONTENTS ....................................................................................................................v

INTRODUCTION ......................................................................................................... xiii

HOW TO USE THIS BOOK ............................................................................................ xv

OPERATING AND PARENT COMPANIES......................................................................xvi

MAJOR CHANGES SINCE 2003-04 ......................................................................................................... xvi

PART 1: 2004-2005 OVERVIEW ......................................................................................1

INDUSTRIAL WATER OUTSOURCING..................................................................................................2

DESALINATION ...........................................................................................................................................4

COMPANIES ACTIVE IN, ENTERING AND LEAVING THE SECTOR ..............................................8

NUMBER OF PEOPLE SERVED BY COUNTRY AND COMPANY................................................. 10

HOW MANY PEOPLE ARE SERVED BY THE PRIVATE SECTOR? ............................................. 11

COUNTRY MARKET DEVELOPMENT, PROSPECTS AND PROGNOSIS ................................... 16

NATIONAL AND INTERNATIONAL PLAYERS AND STRATEGIES COMPARED ....................... 20

PART 2: COUNTRY ANALYSIS ....................................................................................24

ALBANIA................................................................................................................................................................ 25

ALGERIA............................................................................................................................................................... 26

ARGENTINA......................................................................................................................................................... 27

ARMENIA.............................................................................................................................................................. 29

AUSTRALIA.......................................................................................................................................................... 30

AUSTRIA............................................................................................................................................................... 34

BAHRAIN ............................................................................................................................................................... 36

BANGLADESH ..................................................................................................................................................... 37

BELGIUM............................................................................................................................................................... 39

BELIZE................................................................................................................................................................... 42

BOLIVIA................................................................................................................................................................. 43

BRAZIL ................................................................................................................................................................... 45

BULGARIA............................................................................................................................................................ 49

CAMEROON ......................................................................................................................................................... 52

CANADA................................................................................................................................................................ 54

CENTRAL AFRICAN REPUBLIC ...................................................................................................................... 57

CONTENTS


vi

CHAD ..................................................................................................................................................................... 58

CHILE..................................................................................................................................................................... 60

CHINA.................................................................................................................................................................... 63

COLOMBIA............................................................................................................................................................ 71

CONGO.................................................................................................................................................................. 73

COSTA RICA ........................................................................................................................................................ 74

CÔTE D’IVOIRE ................................................................................................................................................... 75

CROATIA............................................................................................................................................................... 77

CUBA...................................................................................................................................................................... 79

CZECH REPUBLIC.............................................................................................................................................. 80

DENMARK............................................................................................................................................................. 83

ECUADOR............................................................................................................................................................. 84

EGYPT................................................................................................................................................................... 86

ESTONIA............................................................................................................................................................... 89

ETHIOPIA.............................................................................................................................................................. 91

FINLAND................................................................................................................................................................ 92

FRANCE ............................................................................................................................................................. 93

GABON ............................................................................................................................................................. 97

GERMANY............................................................................................................................................................ 99

GREECE ...........................................................................................................................................................103

GUINEA ...........................................................................................................................................................105

GUINEA-BISSAU ...............................................................................................................................................107

HONG KONG & MACAU ..................................................................................................................................108

HUNGARY...........................................................................................................................................................109

INDIA ...........................................................................................................................................................111

INDONESIA.........................................................................................................................................................117

IRAN ...........................................................................................................................................................121

IRAQ ...........................................................................................................................................................122

IRELAND ...........................................................................................................................................................123

ISRAEL – PALESTINE ......................................................................................................................................125

ITALY ...........................................................................................................................................................129

JAPAN ...........................................................................................................................................................133

JORDAN ..............................................................................................................................................................136

KAZAKHSTAN REPUBLIC ...............................................................................................................................138

KENYA.................................................................................................................................................................140

KUWAIT...............................................................................................................................................................142

LATVIA.................................................................................................................................................................144

THE LEBANON ..................................................................................................................................................145

LESOTHO............................................................................................................................................................146

LITHUANIA..........................................................................................................................................................148

MALAWI ...............................................................................................................................................................150

MALAYSIA...........................................................................................................................................................151

MALI .....................................................................................................................................................................155

MEXICO...............................................................................................................................................................156

MONGOLIA.........................................................................................................................................................160

CONTENTS


vii

MOROCCO .........................................................................................................................................................161

MOZAMBIQUE ...................................................................................................................................................163

NAMIBIA..............................................................................................................................................................166

NEPAL..................................................................................................................................................................167

THE NETHERLANDS........................................................................................................................................168

NEW ZEALAND..................................................................................................................................................170

NIGER..................................................................................................................................................................172

NIGERIA ..............................................................................................................................................................173

NORWAY.............................................................................................................................................................176

OMAN...................................................................................................................................................................178

PAKISTAN ...........................................................................................................................................................179

REPUBLIC OF PANAMA..................................................................................................................................181

PARAGUAY ........................................................................................................................................................182

PERU....................................................................................................................................................................183

PHILIPPINES......................................................................................................................................................185

POLAND ..............................................................................................................................................................188

PORTUGAL .........................................................................................................................................................191

QATAR .................................................................................................................................................................194

ROMANIA............................................................................................................................................................195

THE RUSSIAN FEDERATION .........................................................................................................................197

SAUDI ARABIA...................................................................................................................................................200

SENEGAL ............................................................................................................................................................203

SINGAPORE.......................................................................................................................................................205

SLOVAKIA...........................................................................................................................................................206

REPUBLIC OF SLOVENIA...............................................................................................................................207

SOUTH AFRICA.................................................................................................................................................209

SOUTH KOREA..................................................................................................................................................212

SPAIN ...................................................................................................................................................................214

SRI LANKA..........................................................................................................................................................217

SWEDEN.............................................................................................................................................................218

SWITZERLAND..................................................................................................................................................220

TAIWAN ...............................................................................................................................................................221

TANZANIA...........................................................................................................................................................224

THAILAND...........................................................................................................................................................226

TRINIDAD & TOBAGO......................................................................................................................................229

TUNISIA...............................................................................................................................................................230

TURKEY ..............................................................................................................................................................231

UGANDA..............................................................................................................................................................233

UKRAINE.............................................................................................................................................................236

UNITED ARAB EMIRATES ..............................................................................................................................238

UNITED KINGDOM............................................................................................................................................239

UNITED STATES OF AMERICA.....................................................................................................................244

URUGUAY...........................................................................................................................................................250

UZBEKISTAN......................................................................................................................................................251

VENEZUELA.......................................................................................................................................................253

CONTENTS


viii

VIETNAM.............................................................................................................................................................255

YEMEN ................................................................................................................................................................257

ZAMBIA................................................................................................................................................................258

PART 3: COMPANY ANALYSIS .................................................................................. 259

ARGENTINA

LATIN AGUAS .......................................................................................................................................260

AUSTRALIA

UNITIED GROUP LIMITED.................................................................................................................261

AUSTRIA

AQUAPLUS............................................................................................................................................262

EVN .........................................................................................................................................................263

BELGIUM

AQUAFIN NV.........................................................................................................................................265

BRAZIL

SABESP .................................................................................................................................................267

CANADA

AQUATECH WATER MANAGEMENT SERVICES INC ................................................................269

CHILE

AGUAS ANDINAS ................................................................................................................................270

ANTOFAGASTA PLC...........................................................................................................................272

CONSORTIO FINANCIERO SA.........................................................................................................273

SACI FALABELLA................................................................................................................................274

CHINA

ANHUI GUOZEN GROUP...................................................................................................................275

BEIJING CAPITAL GROUP ................................................................................................................276

BEIJING SOUND ENVIRONMENTAL INDUSTRY GROUP .........................................................277

CATHAY INTERNATIONAL GROUP ................................................................................................278

CHEUNG KONG INFRASTRUCTURE .............................................................................................279

CITIC PACIFIC LTD .............................................................................................................................280

GLOBAL GREEN TECH GROUP ......................................................................................................281

GUANGDONG INVESTMENT LTD ...................................................................................................282

JIANGXI HONGCHENG WATERWORKS CO ................................................................................283

NANHAI DEVELOPMENT COMPANY LIMITED.............................................................................284

NWS HOLDINGS..................................................................................................................................285

SHANGHAI INDUSTRIAL HOLDINGS..............................................................................................286

SHANGHAI MUNICIPAL RAW WATER CO LTD ............................................................................287

SUZHOU NEW DISTRICT HI-TECH INDUSTRIAL CO LTD ........................................................288

WUHAN SANZHENG INDUSTRY HOLDING..................................................................................289

FRANCE

BOUYGUES...........................................................................................................................................290

SUEZ SA ................................................................................................................................................294

VEOLIA ENVIRONNEMENT SA........................................................................................................308

GERMANY

E.ON........................................................................................................................................................324

CONTENTS


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GELSENWASSER AG .........................................................................................................................325

MVV AG..................................................................................................................................................328

RWE AG .................................................................................................................................................329

GREECE

ATHENS WATER SUPPLY AND SEWERAGE COMPANY SA...................................................339

THESSALONIKI WATER AND SEWERAGE ...................................................................................340

INDIA

BHEL (BHARAT HEAVY ELECTRICALS LIMITED).......................................................................341

IVRCL CONSTRUCTIONS AND PROJECTS LTD .........................................................................342

ITALY

ACEA SPA.............................................................................................................................................343

ACEGAS - APS .....................................................................................................................................345

ACSM COMO ........................................................................................................................................346

ACQUEDOTTO DE FERRARI GALLIERA SPA..............................................................................347

ACQUEDOTTO NICOLAY SPA .........................................................................................................348

ACQUE POTABILI SPA.......................................................................................................................349

AMGA SPA............................................................................................................................................350

ASM BRESCIA SPA.............................................................................................................................352

ENEL SPA..............................................................................................................................................353

ENI SPA..................................................................................................................................................354

HERA SPA.............................................................................................................................................355

META SPA.............................................................................................................................................356

MALAYSIA

ECO WATER .........................................................................................................................................357

INTAN UTILITIES BERHAD ................................................................................................................358

KUMPULAN PERANGSANG SELANGOR BERHAD.....................................................................359

PBA HOLDINGS BHD..........................................................................................................................360

PPB GROUP BERHAD ........................................................................................................................361

PUNCAK NIAGA BERHAD .................................................................................................................362

RANHILL UTILITIES BHD ...................................................................................................................363

SALCON ENGINEERING BERHAD ..................................................................................................364

TALIWORKS CORPORATION ...........................................................................................................365

YTL CORPORATION BHD..................................................................................................................366

MEXICO

AQUASOL ..............................................................................................................................................367

THE NETHERLANDS

NUON NV...............................................................................................................................................368

PHILIPPINES

AYALA CORPORATION......................................................................................................................371

BENGUET CORPORATION ...............................................................................................................372

BENPRES HOLDINGS CORPORATION .........................................................................................373

SAUDI ARABIA

SUADI ARABIAN AMIANTIT COMPANY.........................................................................................374

SINGAPORE

ASIA ENVIRONMENT HOLDINGS LTD ...........................................................................................376

CONTENTS


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BOUSTEAD SINGAPORE LTD ..........................................................................................................377

DARCO WATER TECHNOLOGIES PTE..........................................................................................378

DAYEN ENVIRONMENTAL LIMITED ...............................................................................................379

HYFLUX LTD .........................................................................................................................................380

SEMBCORP INDUSTRIES LTD ........................................................................................................381

SPAIN

AGUAS DE BARCELONA SA............................................................................................................ 382

AGUAS DE VALENCIA SA................................................................................................................. 386

FCC (FOMENTO DE CONSTRCCIONES Y CONTR ATAS SA) .................................................. 387

GRUPO ACS (ACTIVADADES ES CONSTRUCCION Y SERVICOS SA) ................................. 389

IBERDROLA SA.................................................................................................................................... 390

OHL......................................................................................................................................................... 391

TECNICAS VALENCIANAS DEL AGUA (TECVASA) .................................................................... 392

THAILAND

EASTERN WATER RESOURCES .................................................................................................... 393

UNITED KINGDOM

AWG PLC...............................................................................................................................................395

BIWATER PLC/CASCAL NV..............................................................................................................398

BOC GROUP PLC................................................................................................................................401

BRISTOL WATER HOLDINGS PLC..................................................................................................402

DEE VALLEY GROUP PLC ................................................................................................................403

EAST SURREY HOLDINGS PLC ......................................................................................................404

FIRST AQUA (SOUTHERN WATER PLC).......................................................................................405

GLAS CYMRU (DWR CYMRU WELSH WATER)...........................................................................406

KELDA GROUP PLC (YORKSHIRE WATER PLC)........................................................................408

NATURE TECHNOLOGY SOLUTIONS............................................................................................410

NORTHUMBRIAN WATER PLC ........................................................................................................411

PENNON GROUP PLC (SOUTH WEST WATER PLC).................................................................413

SEVERN TRENT PLC..........................................................................................................................414

SOUTH DOWNS LTD ..........................................................................................................................417

SOUTH EAST WATER PLC ...............................................................................................................418

SOUTH STAFFORDSHIRE GROUP PLC........................................................................................419

SWAN GROUP PLC.............................................................................................................................420

UNITED UTILITIES PLC......................................................................................................................421

UNITED STATES OF AMERICA

ALLIANCE WATER RESOURCES....................................................................................................426

AMERICAN STATES WATER ............................................................................................................427

AQUA AMERICA INC...........................................................................................................................428

ARTESIAN RESOURCES...................................................................................................................430

BIW LTD .................................................................................................................................................431

CADIZ INC .............................................................................................................................................432

CALIFORNIA WATER SERVICE CO................................................................................................433

CH2M HILL ............................................................................................................................................434

CONSOLIDATED WATER ..................................................................................................................435

CONNECTICUT WATER SERVICE CO...........................................................................................436

CONTENTS


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COVANTA ENERGY CORP ...............................................................................................................437

MIDDLESEX WATER COMPANY.....................................................................................................438

PENNICHUCK CORPORATION ........................................................................................................439

PICO HOLDINGS INC..........................................................................................................................440

PURE CYCLE CORP...........................................................................................................................441

SJW CORP ............................................................................................................................................442

SOUTHWEST WATER COMPANY...................................................................................................443

TYCO INTERNATIONAL .....................................................................................................................445

WESTERN WATER..............................................................................................................................448

YORK WATER ......................................................................................................................................449

APPENDICES:

APPENDIX 1: THE WATER CYCLE AND WATER SERVICES....................................... 450

APPENDIX 2: PRIVATE SECTOR PARTICIPATION.................................... ................. 456

APPENDIX 3: THE PRIVATE SECTOR AND THE MILLENNIUM

DEVELOPMENT GOALS ......................................................................... . ................. 467

APPENDIX 4: GLOSSARY OF WATER AND FINANCE TERMS

AND ABBREVIATIONS .............................................................................. ................. 471

APPENDIX 5: REFERENCES AND FURTHER READING ............................................. 480

INTRODUCTION


xiii

INTRODUCTION This is the sixth edition of the Mason’s Water Yearbook and thanks to the onward march of new companies across the world the tome continues to grow in substance. This is due to new flows of information as well as new companies entering the sector. The makeup of these new entries shows a dramatic shift towards locally based companies entering the sector in developing economies. The Yearbook has evolved as well, and we hope that it will prove more user-friendly. The front section has been broken up, so that background information on topics such as the water cycle, definitions about the private sector and privatisation and details about the Millennium Development Goals form part of the Appendices, while the first section concentrates on more current issues. Company changes Five companies have left the sector over the past twelve months, but twenty more joined and as with last year, almost all of these have come from countries outside the OECD.

Edition 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Number of countries 13 15 16 15 18 23 - Developed countries 59 69 70 68 73 72 - Developing countries 11 12 12 16 29 45 Number of companies 70 81 82 84 102 117

The entire nature of the market has changed over the past three years. While the ‘Big Three’ remain the clear market leaders, their perceived global domination is rapidly becoming a memory. Goodbye America, hello the world With the notable exception of Tyco’s Earth Tech, the withdrawal of US companies from the international water and wastewater services market is effectively complete. The insularity of the world’s largest market is perplexing, but it does reflect upon some rather hasty expansion strategies and the problems companies face as environmental and public health standards are rolled back by the current administration. The power-water multi utility approach, which was in the vogue in the USA and Spain, has almost been wholly unbundled. It continues to have its adherents in France, Malaysia and the UK and clearly has its charms when seeking to offer a broad range of industrial services to major clients but the subtle differences between the two services were often not fully appreciated before projects failed to perform to expectations. Country changes The solitary new entry this year is more in hope than expectation. Much has been written about the need to reconstruct Iraq’s water and wastewater services; somewhat less on how it got into its current state. The current instability in this country, allied with the tactic of targeting expatriate workers means that just doing the work that needs to be done is hard enough before it was announced that much of the funding promised for network rehabilitation being diverted towards military spending. Moldova, Montenegro, Nicaragua and Serbia are set to appear in the next edition and Eastern Europe and Central Asia continue to be of interest as markets expand beyond the newly enlarged European Union and the increasingly active role being played by the European Bank for Reconstruction and Development. 2004: Learning to live in testing times The current year is set to be the weakest year since 1998 or 1966 for contract gains and in net terms, it currently looks like being the weakest year since 1995. After contracts covering eight million people were handed back, there was a net gain of ten million for new contracts. Even so, there is a stream of project development taking place and much of this is in countries such as the Russian Federation and Northern Ireland, where PSP looked to be unfeasible a few years ago. Avoiding a decade of inaction The World Water Vision for 2025 was launched at the Second World Water Forum at The Hague in 2000. It was designed to represent a multilateral and multinational consensus for gaining universal access to water and sanitation by 2025. In September 2000, 189 United Nations Member States adopted the Millennium Development Goals, including to ‘Halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation.’ The Second Earth Summit in Johannesburg (2002) ratified the MDG targets and as with The Hague’s World Water Vision, emphasised the role of the private sector in providing financial and management resources. The United Nations International Decade for Action “Water for Life” 2005 – 2015 will be launched at World Water Day on 22 March 2005. The Decade for Action is designed to highlight the disparity between progress to date and

INTRODUCTION


xiv

the work needed to attain the water and sanitation MDGs as highlighted by UNICIEF & the WHO’s review of progress since 2000 published this year. While the UN explicitly recognises the contribution needed from the private sector to attain these goals, the failure of the 2003 Kyoto World Water Summit to build upon the momentum of the previous summits. The Fourth World Water Forum, due to be held in Mexico in March 2006, is set to be a crucial engagement between the private sector and various stakeholders for the implementation of effective management strategies. Issues about funding flows remain One of the key points about PSP was that it would mobilise new sources of funding, especially from the richer countries to those who were starved of funds as well as water. Since 2001-02, the flow of project funding to clients outside the OECD countries has eased to an unsteady drip. Some of this shift reflects the problems being encountered by international players, especially relating to foreign exchange risks. Local or expatriate funding obviates exchange rate risk but plays a limited role in mobilising new sources of funding needed to attain the Millennium Development Goals. Even international contracts are increasingly being financed locally, and this funding is distinctly finite when compared with the amount of water and sewerage infrastructure finance needed over the next decade. A slightly more cautious set of forecasts We have changed our forecast for PSP coverage from 17% of the world’s population by 2015 to 16%, with 8.7% of the population currently being served in some manner by the private sector. Interestingly, while our forecast for North America has been severely lowered, other forecasts remain either stable or have been marginally increased. This reflects the fact that the problems facing global water management simply will not go away because some politicians seek to fight old battles on new fronts. Indeed, not only has China been a powerhouse during the year, but India has emerged with a new political will to address water problems with a significant amount of private funding and management. Industrial water outsourcing thrives The market for outsourcing industrial water and effluent services has enjoyed another good year, although in the USA, progress has been patchy due to the lowered emphasis on environmental compliance and companies reacting to some over-enthusiastic bidding in previous years. Players such as GE and Ionics hover in the background getting to know the market through buying specialist players or by moving from manufacturing to services. Outside the USA, the market continues to grow at 15-20% per annum with outsourced revenues in the region of US$ 3 billion out of a US$ 80-100 billion market. Desalination gains a taste for independence As the cost of desalination falls to the point where it is becoming commercially viable for a significant number of markets, the role of the private sector in financing and operating these facilities increases. To date, we have concentrated only on those facilities such as in Singapore and Israel which are solely devoted to water production. Given the capital bias in a water and power project that remains a valid approach. Using membrane technologies also make single purpose water facilities more attractive. The next few years are set to see a significant expansion in desalination plant, even one serving Thames Water. That a privately run facility is being considered for Chennai is testament to how markets and technologies can move on. Taking the Yearbook forward The task of assembling each edition of this Yearbook provides a mass of new insights into the market and its modus operandi. Each edition gets closer to its goal of providing a true and fair view about the markets and companies that serve them. The author is responsible for any errors and omissions that may occur in this Yearbook. He is thus grateful for any feedback and suggestions so that future editions can rectify them and more closely reflect the needs of its readers. Dr David Lloyd Owen October 2004

HOW TO USE THIS BOOK

xv Masons Water Yearbook 2004 – 2005

HOW TO USE THIS BOOK The Masons Water Yearbook is divided into four parts. Part 1, The World of Water takes a look at trends noted in water and wastewater services worldwide over the past 12 months and considers how these are set to evolve. Part 2 covers countries of interest to those involved in providing water and wastewater services. Part 3 consists of entries of companies providing these services that are wholly or partly in the private sector. The Appendices make up the final part and provide background data about the sector, a Glossary of Terms and Abbreviations used in the Yearbook and a listing of the main references used. Country entries Population and economic data is given in order to provide an indication of demographic trends and the current state of economic development. The former outlines the size of the potential market, while the latter highlights affordability issues and spending priorities. The surface water and ground water data boxes outline how much water is available in each country on an annual basis, along with how much is currently being taken out. For groundwater, water availability relates to the annual natural recharge of water into water bearing rocks. For surface water, this refers to water that is in an abstractable form, entering rivers, streams and lakes wither through rainfall or rivers in neighbouring countries. Generally, any country that takes more than 25% of these renewable resources is likely to be facing at least regional water shortages. Greater shortages indicate that remedial action will be needed in the medium term. Where reference is made to specific data, it is mentioned in the country entry. Otherwise, a range of global and regional overviews have been used for compiling the common data entries. Details about these can be found in the References section in the Appendices. Company entries The country entries provide a description of how each company became involved in the sector and its overall strategies, when known. Wherever possible, a Profit & Loss account is provided along with contact data (company address, main switchboard, and web site, along with senior management) and details about water and wastewater services in their home and international markets. While the company contact details are as up to date as possible, the turnover in senior management seen in the sector means that names can often change as the year goes by. In addition, wherever possible, international contracts are tabulated to show [1] year of contract award, [2] city/region, [3] contract type and duration and [4] population served and service provided. The two tables that immediately follow these remarks are designed to provide access to company entries where different names are used for the same company or company circumstances have changed or are about to change. Glossary The water and wastewater sectors are not immune to jargon and acronyms. The Glossary at the back of the Yearbook provides an explanation of those examples that are to be found in this book. As with definitions of contract types, definitions of certain terms can vary. In this book, we have kept with the most commonly accepted definitions and those that are most likely to be of relevance to potential readers. References As well as outlining the major studies that have provided the basis for the country data entries, the references are divided into thematic sections to provide a selection of the more pertinent publications about water and wastewater services and their political, social, environmental, economic and regulatory contexts. Web sites are not included in this section due to their transient nature.

OPERATING AND PARENT COMPANIES

xvi Masons Water Yearbook 2004 – 2005

OPERATING COMPANIES AND PARENT COMPANIES Operating Company Parent Company(s)

American Water Works (USA) RWE (Germany) -Cascal Biwater (UK)/Nuon (Netherlands) EMC (USA) BOC (UK) Ondeo/Lyonnaise des Eaux Suez (France) SAUR Bouygues (France) Thames Water (UK) RWE (Germany) Veolia Water/Generale des Eaux Veolia Environnement (France)

MAJOR CHANGES SINCE 2003-04 New Names

ACS (Spain) ACS acquires Dragados Aqua America (USA) Philadelphia Suburban Water’s new national name South Staffordshire PLC Demerger from South Staffordshire Group New Entries

Antofagasta (Chile) Gained one concession in 2003 Aquaplus (Austria) BOT contracts in Austria Aquasol (Mexico) BOT contracts gained in 2003 & 2004 Aquatech (Canada) Bought SAUR’s Canadian activities Asia Environmental Holdings (Singapore) IPO in 2003 Beijing Capital Corporation (China) Entered sector and divisional IPO planned Benpres Group (Philippines) Concessions in the Philippines BHEL (India) Gained one O&M contract in 2003 Boustead Singapore (Singapore) BOT in Indonesia gained in 2004 Cheung Kong Infrastructure (China) Acquired two water companies in 2004 Citic Pacific (China) Joint ventures in China Consorcio Financiero (Chile) Gained two Concessions in 2003 Falabella (Chile) Gained three Concessions in 2004 OHL (Spain) BOT contracts in Spain & Mexico Jiangxi Hongcheng Waterworks (China) IPO in 2004 Latin Aguas (Argentina) Concessions in Argentina NWS Holdings (China) Suez’s Chinese joint venture partner Penta Finance (Czech Republic) Acquired SMVAK in 2004 Pure Cycle (USA) Water rights activities in 2003 Saudi Arabian Amiantit (Saudi Arabia) Acquired Aquamundo during 2003-04 Shanghai Industrial Holdings (China) Entered water sector in 2003 United Group (Australia) Acquired operations from RWE Thames in 2004 Companies Removed

Allete (USA) Water activities sold to Aqua America and municipalities DQE / Aqua Source (USA) Water activities sold to Aqua America Bechtel (USA) Sold its water activities, mainly to United Utilities Ferrovial (Spain) Sold its water activities to Aguas de Barcelona Union Fenosa (Spain) Sold Cambridge Water to Cheung Kong Infrastructure Anticipated forthcoming changes

Acquedotto Ferrari Galliera (Italy) To be integrated into Amga/ACEA (Italy) Acquedotto Nicolay (Italy) To be integrated into Amga/ACEA (Italy) Bouygues (France) Considering selling SAUR Covanta (USA) Agreed bid by Danielson Holding ENEL (Italy) Seeking to divest its water activities ENI (Italy) Seeking to divest its water activities

1 Masons Water Yearbook 2004 – 2005

PART 1: 2004-2005 OVERVIEW



INDUSTRIAL WATER OUTSOURCING Industrial water outsourcing is concerned with the provision of services relating to the delivery of process water for specific industrial applications and the treatment of industrial effluents by specialist players rather than using municipal (incumbent) services or dealing with these matters in-house. It is a relatively small market at present, as it is not recognised as a distinct market in many countries. The market is currently found in three main key areas: [1] OECD member states where it is driven by effluent treatment standards, [2] Multi nationals applying ‘headquarters’ standards in other countries, and [3] Companies needing process water to a stated quality. This market is also part of a larger market for industrial services: waste and wastewater management, waste management, energy provision and management and office management. A number of multi service contracts have been awarded both for an individual site or all of a corporate customer’s facilities. As water utilities are made to operate on a commercial basis they are increasingly looking to charge industrial users for water abstraction. Industrial development requires constantly higher levels of water purity at a time when water resources are being degraded by effluent discharges and over-abstraction of groundwater resources. Industrial and energy generation cooling systems need water of a given purity so as to ensure that systems are not affected by scale and particulate build up. Advanced industries such as sem iconductors and pharmaceuticals require ultra pure water for a number of applications. These needs call for water treatment and filtration systems that are either installed or operated by manufacturers on a contract basis. Ultra pure water is regarded as an essential commodity by its users and they are ready to pay a commercial price for its provision. It is thus a quality, not price driven market. Environmental legislation, driven by public health and environmental concerns are resulting in a wide range of industries in developed and developing economies being forced to treat their effluent discharges to a prescribed degree. This is either carried out at the facility, tankered to an industrial waste treatment centre (where these exist) or through paying the sewerage utility a suitable fee for effluent to be treated at a sewage treatment works. Again, there is considerable scope for a third party either to install an in-house treatment facility or to operate the facility as part of an environmental compliance package. There is also a move towards utility and environmental service outsourcing as an integrated package by companies in the USA and Europe and other countries. Market estimates Unlike municipal customers, there is a notable consensus across the spectrum of political opinion that industrial customers ought to pay for their services, although in practice, in certain countries there has been a tradition that industrial customers are treated somewhat generously when considering the practicalities of the polluters’ pays system. Industrial water and wastewater costs are driven by the need for extensive treatment to set standards, where the treatment facility and the client are typically in close proximity. In contrast, the main cost driver for municipal water and wastewater is in getting the liquids to and from the treatment facility along with customer services such as billing and leakage reduction. The US market was initially driven by standards enforced by the US Environmental Protection Agency. As an industry’s wastewater treatment infrastructure is developed, the balance in spending shifts towards operating these assets and upgrading them as new standards come into force. In the longer term, waste avoidance and minimisation will create new opportunities for service development. The USA and Europe dominate the global market, along with Japan. The global industrial services market is worth in the region of US$425–500 billion per annum, with water and wastewater accounting for US$80–105 billion of this. Indicative estimates of the size of the market, 2004:

US$ billion Industrial Services Water & Wastewater W & WW Outsourced North America 115-135 25-30 1.1-1.2 Europe 130-155 30-40 0.4-0.8 Rest of the World 80-110 15-25 0.3-0.4 Global total 425-500 80-105 1.8-2.4

The outsourced market has been growing at 15-20% pa since 2001, with the exception of the USA in 2003, which showed little growth. The latter is in part due to the weak economy and deteriorating environmental standards, and also due to companies needing to reconsider their approaches after bidding too aggressively for contracts in the 1998-2000 period. Sources: Veolia, Frost & Sullivan, Ionics & Suez



Companies active in the sector Twenty companies have been identified to date. Their revenues in 2003 ranged from €1 million (Nature Tech) to approximately €500 million (Veolia Environnement and Suez Ondeo).

Cascal (Biwater / Nuon) Wastewater, Chile & Mexico CH2M Hill (OMI) Water & wastewater, USA Darco Water, South East Asia Dayen Water, China Eco Water Wastewater, Malaysia EMC (BOC) Water & wastewater, USA Enviro-Logic (Pennon) Water & wastewater, UK Gelsenwasser Water & wastewater, Germany Global Utilities Alliance Water, Thailand Hyflux Water & wastewater, Singapore & China Nature Technology Solutions Wastewater, Gibraltar & Norway Northumbrian Water Water & wastewater, UK OIS (Suez) All services, quasi global RWE Water & wastewater, USA Salcon Water & wastewater, South East Asia Sembcorp Water & wastewater, Singapore STES (Severn Trent) Water & wastewater, USA Tyco (Earth Tech) Water & wastewater, USA, Hungary, Australia & Venezuela United Group Water, Australia UUIS (UU) Effluent treatment, UK & Australia Veolia Water (VE) All services, quasi global

Recent developments The market is developing strongly in both Europe and South East Asia, although for separate reasons. In Europe, the EU’s Integrated Pollution Prevention and Control (‘IPPC’) Directive, along with the Water Framework (WFD) and Urban Wastewater Treatment Directives are forcing demand for custom ‘compliance packages’ from industrial clients, along with the EU accession process spurring activity amongst companies operating in the ten accession states. The WFD also calls for cost recovery in all water provision from 2010. In both the EU and South East Asia, the need for reliable sources of water of a given quality and price cannot be underestimated. Already, 2004 has seen one of the largest such outsourcing contract awards. PSA Peugeot Citroen has awarded Veolia a €1 billion 10 year contract for outsourcing of industrial services for its eastern European car manufacturing activities. Meanwhile, Tyco’s Earth Tech has a €50 million project for developing and upgrading effluent treatment services at MOL’s oil and gas facilities in Hungary. This contract is of particular interest, as it has been supported by €18 million of EBRD finance. This is becoming one of Earth Tech’s fortes, as it already operates similar contracts in the USA, Venezuela and Australia. In addition to the Peugeot contract, Veolia Water Industrial Outsourcing (VWIO) already has two €900 million contracts in South East Asia. Indeed, the only area where growth is slowing down is the USA, where US Filter recorded revenues of US$318 million from industrial clients in 2002. Ondeo’s Ondeo Industrial Services (OIS) gained 90 contracts worth €500 million in total revenues during 2002, its first full year of operation and during 2003, its revenue grew from €139.8 million to €168.0 million, with an organic growth of 19.1%. In January 2004, OIS won a €120 million 20 year contract for supplying process water to BP's Grangemouth oil refinery. In Singapore, companies have been developing activities in China. Sembcorp Utilities, a provider of multi utility services to some 30 industrial clients in Singapore has a 55% stake in an effluent treatment facility serving the Nanjing Chemical Industrial Park in Jiangsu Province. The 12,500m 3 per day facility will serve petrochemical and chemical customers from the fourth quarter of 2004. Meanwhile, Dayen has a joint venture for water and wastewater services to an industrial park in Beijing. In both cases, the idea is to provide services for clients as they develop their activities.



DESALINATION Desalination is becoming increasingly important in arid parts of North America, Asia and Europe as well as in its traditional territory of the Middle East and North Africa. It is traditionally seen as a costly and energy intensive form of obtaining potable water, which becomes economically viable due to endemic water shortages in certain areas. Because of the costs of production, desalinated water is mainly used for municipal and high value commercial markets. Membrane based desalination is often associated with power projects so as to minimise the costs of pumping saline water through the filtration units. During the 1990s, the cost of water production fell from US$3.5-5.0 per cubic metre to US$1.2-2.0 per m 3. Processes have become cheaper over time… The table below compares prices for the two most popular processes, multiple stage flash distillation (MSF) and reverse osmosis (RO). Operating and financing cost by process:

US$ per m3

(1995 prices) MSF RO

1960 8.8 NA 1965 6.8 2.2 1970 5.0 1.8 1975 3.6 1.3 1980 2.8 1.1 1985 2.4 1.0 1990 1.6 0.9 1995 1.2 0.7 2000 1.0 0.6

…and is now a viable water management option Since 2000, larger RO projects are delivering water at a range of US$0.45-0.80 per m³. Three current projects are at the lower end of this range: Veolia (Ashkelon); US$0.47-0.52 per m³, Hyflux (Singapore); US$0.46 per m³, and Tampa Bay (Ownership currently under change); US$0.45 per m³. The emphasis on attaining further savings lies in optimising the energy required to push water through the membrane system, along with the recovery efficiency of the system and getting the cost of financing the capital expenditure down. Technologies are now being developed that can bring the cost of desalination down to US$0.25-0.35 per m³. As the cost of desalination falls, it has become a viable option in developing tourist resorts in otherwise arid areas and is increasingly being used for industrial water. Costs depend on what you put in The purer the feed water, the less work needs to be carried out and the cheaper the process is.

Feed water US$/m3 Seawater 0.73 – 1.17 Municipal wastewater 0.58 – 1.07 Brackish surface water 0.29 – 0.68

Brackish water (groundwater that has saline contamination or water from tidal rivers) is the cheapest resource, but it has limited potential in terms of offering the suitable feed stock close to a demand base. Reclaiming municipal wastewater is an increasingly important approach of ‘closing’ the water cycle by minimising water wastage and minimising the environmental impact of sewage. Most business consists of plants that use seawater and that will continue to be the case for some time. Desalination capacity – by input water:

Sea water 58% Brackish water 23% River water 8% Waste water 5% Pure water 5% Other 1%

Macro drivers are compelling Climate change is making increasing demands on scarce water resources and increasing the costs of conventional means of bulk water abstraction, treatment and distribution. For example, in 2004, the Spanish Government has scrapped plans for a North-South water diversion project in favour of increasing desalination capacity. Deteriorating ground and river water quality is also a factor in developing economies where major cities are close to sea and brackish water sources and population growth is being spurred by urbanisation.



With lower costs, capacity has jumped ahead Desalination capacity, 1970-2003:

Million m3 per day Contracted In operation 1970 1.5 1.5 1980 8.0 8.0 1990 15.5 14.0 2000 29.0 21.5 2003 37.5 27.5

Many of the facilities built in the 1960s have been scrapped as they have fallen into disrepair or have become economically unviable. Some 17,000 plants worldwide are in operation at 12,500 sites. Most of the water is produced by 3,000 plants with a capacity in excess of 100m 3 per day. Reverse osmosis is becoming the norm outside the Middle East… Outside the Middle East, reverse osmosis using membrane technology is set to dominate the market. In 1990, 60% of installed capacity was thermal, by 2001 53% was membrane based. This trend is accelerating as new plant is developed globally and even the Gulf states start appreciating the cost advantages of RO. In 2002-03, RO accounted for 75% of the 4.8million m3 per day in new capacity. The table below compares the two technologies.

Thermal (MSF) Membrane (RO) Water quality Very good (<25 ppm TDS) Good (350-1,000 ppm TDS) Reliability Proven, good Improving Water recovery 10-20% 30-60% Energy needs High Low Energy source Oil Electricity Capex & Opex High Medium

There are two areas of concern regarding RO: the water can need further polishing for certain applications, but it is potable, and; reliability of membranes has been a problem in the past, but the track record of membranes is understood to have improved appreciably in the past decade and the current generation of membranes can be expected to last for 5-12 years. …although thermal process dominate the ME markets In the Middle East, US$2.6 billion pa in spending is anticipated between 2002 and 2030, with the expectation of approximately 90% of this spending being on thermal and 10% on membrane technology. It is likely that the proportion of spending on membrane technology will rise as cost differences are appreciated. Some leading markets Globally, the Middle East is the leading market. Installed capacity, 2001:

Europe 13.3 % Middle East 49.1 % Africa 5.1 % Asia 11.2 % Australia 0.8 % North America 16.1 % Central America 3.5 % South America 0.8 %

The USA’s current capacity is almost all for brackish water desalination. Future capacity is set to concentrate on sea water desalination.

m m3/day Process Saudi Arabia 6.2 MSF United States of America 5.5 RO United Arab Emirates 5.0 MSF Spain 2.0 RO Kuwait 2.1 MSF/RO



Spending takes place in cycles… Spending on desalination is not just linked to demand, it depends on the availability of finance, fuel costs and the willingness of governments and companies to commit themselves to long term projects. The size of the leading projects means that the actual spending on new plant is variable from year to year, especially at the country level. Indicative annual spending ranges on desalination plant (US$ million):

1995-99 2000-03 Southern Europe 230 420 Northern Europe 75 70 Asia 450 500 North Africa 110 70 Gulf States 300 550 Rest of ME 30 50 USA & Caribbean 100 100 Saudi Arabia 300 210 Global total 1,595 1,970

Source: Compiled from various Frost & Sullivan surveys, VE and Government data To date, some US$35 billion has been spent globally on desalination plant. Current spending is in the region of US$2 billion pa, according to VE. …with a long term increase in demand set to take place Saudi Arabia has spent US$19 billion on 30 plants to date and is planning to spend up to US$40 billion on increasing its capacity over the next 20 years. Various projections point to the global market growing to US$3.0–3.5 billion pa from 2005-06, with most growth taking place in the MENA region. This is the equivalent to market growth of 7% overall and 15% in the MENA region. Desalination capacity in the MENA region is expected to increase from 12million m3 per day in 2000 to 30million m3 by 2010 of which 4million m3 was contracted for in 2000 and 10million m 3 is in the award process. A new capacity of 31million m 3 per day is anticipated between 2005 and 2015, with a total of US$95 billion in new spending:

Systems Annual spending New capacity Capex US$3.0 billion New capacity Opex US$1.8 billion Current capacity Opex US$4.7 billion

Source: Media Analytics, 2004 Other new markets include China and India, who plan on installing 650,000m 3 per day in new capacity by 2015. The Indian Government is committed to a series of BOT projects for Southern India and in China this is seen as a method of alleviating shortages in water (both for quality and quantity) on the eastern seaboard. In the UK, Southern Water (First Aqua) and Thames Water (RWE) are examining proposals for brackish water facilities. The size and scope of projects is growing Not only is the market set to grow, but the size of facilities is increasing as is the tendency to involve private sector funding and operation. The Independent Water and Power Project market (IWPP) has emerged over the past decade as a way of financing new power and water capacity, especially in the Middle East. IWPPs are now emerging across the USA, Europe and Asia, including in countries that otherwise have no other private sector involvement in their water services. Some illustrative projects:

Location Capacity (000 m3/day)

Start Date Project Type

Taweelah B, UAE 454 2008+ BOOT Shouabia, Saudi Arabia 800 2007+ BOOT Ras al-Zour, Saudi Arabia 800 2007+ BOOT Jubail, Saudi Arabia 340 2007+ BOOT Shuqaiq, Saudi Arabia 100 2007+ BOOT Taweelah RO, UAE 200 2007 BOOT Sohar, Oman 150 2007 BOOT Algiers, Algeria 200 2006 BOOT Ashkelon, Israel 274 2005 BOOT Singapore 136 2005 BOOT



Location Capacity (000 m3/day)

Start Date Project Type

Tampa Bay, USA 95 2003 DBOT Umm Al Nar, UAE 365 2003 BOOT Shuweihat S1, UAE 454 2001 BOOT Taweelah A1, UAE 325 2000 BOOT Taweelah A2, UAE 200 1999 BOOT

For private sector players, there are many opportunities: building and operating as part of a IWPP consortium (VE, Suez and Bouygues for example), for providing specialist engineering and allied services (Hyflux of Singapore and Ionics of the USA) or for operating dedicated facilities, such as by Consolidated Water of the USA.

PART 1: 2004 - 2005 OVERVIEW


COMPANIES ACTIVE IN, ENTERING AND LEAVING THE SECTOR We shall not cease from exploration And the end of all our exploring Will be to arrive where we started And know the place for the first time. TS Eliot, Little Gidding from the Four Quartets (Faber & Faber). In terms of corporate activity, this has been the most remarkable year since the Yearbook began. Something old… The five companies that left the sector over the past year are all variations of examples where the power and water multi utility approach did not deliver the expected returns. Three were in the USA (Allete and DQE/Aqua Source sold their activities to Aqua America and municipalities and Bechtel sold its International Water stakes, mainly to United Utilities) and two were from Spain. Ferrovial sold its activities to Aguas de Barcelona and Union Fenosa sold Cambridge Water to Cheung Kong Infrastructure. …something new… Some of the new entries this year are ‘new’ in the sense that they have come to the author’s attention for the first time. This is somewhat akin to tribes being ‘discovered’ by explorers. Nobody had told the tribes -people that they did not exist prior to that moment! Still, it is good to be able to include these companies, as a more rounded picture continues to emerge. It is likely that more companies will be ‘found’ in China and Russia in the coming year, amongst others, due to the work being carried out this year by those who both understand the business and its local vernacular. The editors and correspondents of ‘Global Water Report’ and ‘Global Water Intelligence’ continue to play a crucial role in this respect. This year’s ‘discoveries’ are: Aquaplus (Austria, BOT contracts in Austria); Aquatech (Canada, bought SAUR’s Canadian activities); Beijing Capital Corporation (China, concessions in China and an IPO planned); OHL (Spain, BOT contracts in Spain & Mexico) and; Latin Aguas (Argentina, concessions in Argentina). Another discovery takes place through a change in perception. Local partners in joint ventures are seen to be taking increasingly active roles. For Benpres Group (Philippines, JV with Suez for Manila), this entry may be a brief one, as the concession’s equity and debt structure is currently under fundamental re-appraisal. In contrast, China’s Citic Pacific NWS Holdings, JV partners for Veolia and Suez respectively have seen their relationships placed firmly on an equal footing. Indeed, Citic has taken a majority stake in one concession. There were two IPOs in 2004, compared with 14 between 2000 and 2003. This in part reflects a shift away from floating ATOs in Italy at their privatisation to combining them with ATOs that have previously been floated. This in turn reflects the fact that these later ATOs are often appreciably smaller than the likes of ACEA and Hera. This year’s IPOs were Asia Environmental Holdings (Singapore), a privately held engineering com pany and Jiangxi Hongcheng Waterworks (China), a municipal water company. In contrast, eight companies have been identified as gaining contracts during the past year. In Chile, a notable shift in the privatisation process took place with all five concession awards going to three local companies (Antofagasta (Chilean based, but with a London Listing), Consorcio Financiero and Falabella) and Consorcio Financiero acquiring AWG’s interests in Chile. The privately held Aquasol gained two BOT in Mexico, and India’s BHEL gained one O&M contract. Boustead (Singapore) has signed an agreement that is set to lead to the largest concession award in Indonesia since Jakarta in 1997. Pure Cycle is an exception in the water rights market in the USA that it has a firm contract entering into operation this year. Finally, China’s Shanghai Industrial Holdings entered the water sector in late 2003 and is seeking to become a substantial player in its home market. The four major acquisitions noted this year are fascinating for their diversity. Cheung Kong Infrastructure (China) builds upon YTL of Malaysia’s example by investing in water assets in developed economies. By acquiring Cambridge Water in the UK and Australia’s Water Tower, CKI is in effect reversing the flow of capital in water investment. Penta Finance (Czech Republic), who acquired SMVAK in 2004, are a financial company which probably regards SMVAK as an investment rather than a core asset. In contrast, Saudi Arabian Amiantit (Saudi Arabia), which acquired Aquamundo and United Group (Australia), which acquired operations in Australia and South East Asia from RWE Thames are both seeking to use these activities as a base for future expansion.



…something borrowed… Who lives on borrowed time? Not for the first time is Bouygues announcing that it seeks to sell SAUR. This may be a complex process as Bouygues may wish to optimise the company’s assets before selling them off, or even to partially float the company. This process may take some time. Also at some time in the future, it remains likely that both Acquedotto Ferrari Galliera and Acquedotto Nicolay will be fully integrated into Amga and ACEA’s activities serving the city of Genova. Both ENEL and ENI are seeking to divest their water activities in Italy and internationally within the next year and after its agreed bid by Danielson Holding, Covanta will finally complete the ending of its water and power business model. That will mark the effective end of the multi-utility approach in the USA. …and something blue As noted above, new entrants are constantly emerging, either through entering the public domain or from entering the sector either through privatisation or contracts gains. It is most likely that there will be more entries for smaller companies in India and Brazil, where new data was coming to light as this edition went to press. Interest in industrial water services outsourcing continues to grow, with a number of specialists entering the market. Ionics (USA) is seeking to expand from engineering to services, while GE (USA) acquired Osmonics to get engineering experience, following the example of BOC, which acquired EMC in 2003 to gain operational experience. ITT, who acquired Germany’s Wedeco and Praxair, along with Calgon (Waterlink) and Pentair (Everpur) are also considering opportunities. It looks unlikely that there will be fewer players active in the market in a year’s time. Indeed, the recent theme of increasing complexity and local specialisation looks set to be maintained for some time.



NUMBER OF PEOPLE SERVED BY COUNTRY AND COMPANY Developments during 2003-04 After the dramatic setbacks noted in 2003, with contracts being handed back and a cooler corporate attitude towards seeking contracts in developing economies, 2004 has been a case of more of the same, albeit in a more phlegmatic climate. This is due to the remarkable strength of the market in China keeping many companies fully occupied, along with the emergence of new, locally based companies. Major PSP contract losses, January 2003 to October 2004 Major contract losses covering 8.20million people have been identified during 2004, against 3.73million in 2003. In the case of China (two contracts covering 2.80million people) this was due to a law passed in 2002 outlawing fixed rates of return for foreign owned contracts. Suez handed back the Puerto Rico contract (which has previously been handed back by VE) after being unable to renegotiate its terms and the Bogota wastewater treatment works contract was pulled in circumstances that still remain unclear.

Year Country Location Contract Company(s) 2003 Canada Halifax WW O&M (380,000) Suez Ondeo 2003 USA Atlanta Water O&M (2,000,000) Suez Ondeo 2003 USA Florida Water asset owning (350,000) Allete 2003 Vietnam Thu Duc Bulk water BOT (1,000,000) Suez Ondeo 2004 China Xian Bulk water BOT (1,500,000) Berlinwasser 2004 China Shanghai Bulk water BOT (1,300,000) RWE Thames 2004 Colombia Bogota WW BOT (1,500,000) Suez Ondeo 2004 Puerto Rico Puerto Rico Water BOT (3,900,000) Suez Ondeo

Prior to 2003, contract losses were less than 2million, so there has been a change in the operating climate. That change appears to have steadied, although the future of the Suez/Benpres concession for Manila remains uncertain. Major PSP contract gains, January to October 2004

Country Location Company Contract (population) Australia Cranbourne Tyco Wastewater (50,000) Chile ESMAG Falabella Water & WW (147,000) Chile ESSAR Falabella Water & WW (581,000) Chile ESSAT Falabella Water & WW (409,000) China Hohhot VE Water (2.5million) China Tianjin Suez/NWI Water (850,000) China Qingdao Suez/NWI Water (NA) China Weinan VE Water (300,000) China Zun Yi VE Wastewater (600,000) China Beijing VE Wastewater (NA) China Dao Bing Dayen Wastewater (125,000) China Ma'anshan Interchina Holdings Wastewater (300,000) China Nanchang Jiangxi Hongcheng Water (1.45million) China Nanjing SIH Wastewater (1.5million) China Nantong AEH Water (400,000) China Linqu & Weifang Salcon Water (750,000) China Linyi Salcon Water (500,000) China Sanya Suez/NWI Water (300,000) China Tanggu Suez/NWI Water (850,000) China Xiamen SIH Water (1million) Czech Rep. E Moravia VE Water & WW (160,000) Germany Cottbus Suez Water & WW (147,000) Germany Dresden Gelsenwasser Wastewater (480,000) Germany Kiel MVV Water & WW (380,000) India Chennai BHEL Wastewater (100,000) India Visakhapatnam Larsen & Toubro Water (500,000) Indonesia Yogyakarta Boustead Water (450,000) Italy Agea Hera ATO, Water (100,000)



Country Location Company Contract (population) Italy Livorno, Tuscany Amga ATO, Water & WW (350,000) Italy ATO, Tortona Amga ATO, Water & WW, (43,000) Korea Kumdam VE Wastewater (200,000) Mexico Mexacali Tyco Wastewater (1million) Mexico Pachuca Aquasol Water (150,000) Mexico San Luis Potosi Suez Wastewater (400,000) New Zealand Thames -Coromandel VE Water & WW (25,000) Russia Moscow Suez Water (1million)

During the year to date, contracts serving a total of more than 18.6million people have been identified. This means that there has been a net gain in contract terms of at least 10.4million. HOW MANY PEOPLE ARE SERVED BY THE PRIVAT E SECTOR? To gain a reasonable picture of the status of private sector participation in water and wastewater services requires a suitable set of operational assum ptions that are robust enough to deal with the vagaries of the data that is currently available. There are three quantifiable sets of data available: [1] Contract information at the time of the award [2] Published data on service extension and demand growth subsequent to the contract award [3] Data about the current status of markets with a long-established private sector presence In addition, populations grow within contract areas as a result of urban migration and indigenous population growth. This can be regarded as a contract’s organic growth. These figures are extremely difficult to quantify where urbanisation involves people moving into informal settlements as the likelihood of any connection to a formal water service (let alone sanitation) is minimal unless a specific initiative (such as at Las Paz in Bolivia by Suez) has been developed by a concession holder. As a result, population growth figures have been kept to a minimum. For the sake of simplicity, all contracts that have subsequently been ended whether at the end of the contract life or prematurely, as a consequence of various externalities have been excluded from the ongoing picture. The major contract exits since 2003 have been included in a separate table, as these have become a material factor over the past two years. How (and why) numbers served change Positive drivers: • Privatisations and IPOs: Contract awards (the Hohhot concession award in China to VE in 2004), the

acquisition of municipal service companies by private companies (ESSAR by Chile’s Falabella) or stock market flotations (the IPO of Jiangxi Hongcheng in China in 2004). In addition, privately held companies (Asia Environmental Holdings in Singapore in 2004) can be floated, bringing them to the public’s attention.

• Acquisitions: The acquisition of small, privately held companies by larger entities. This is particularly notable in the USA, where there are many privately held companies serving 150 - 5,000 people and having a very low profile. Aqua America and RWE’s AWW both pursue an aggressive tuck-in acquisition strategy.

• Service extension and population growth: Water and sewerage services are extended to people who have previously relied on water vending or informal water supplies. New developments within a concession area are connected to the networks. Aguas Argentinas is an example of both.

Negative drivers: • Condemnations and re-nationalisations: The USA can be a surprisingly hostile place for the private

sector. Municipalities can ‘condemn’ a regulated operator and seek to buy its assets from the owner as recently seen at Pennichuck. In France concessions were nationalised as the political climate changed between 1918 and 1939 and Suez has lost two significant contracts since 2001.



• Divestment: Concessions being handed back as a company changes strategy (Suez in Puerto Rico), or judges that a contract has become inoperable (International Water in Bolivia). Companies can also be sold to municipalities when a parent company changes direction as seen with Allete’s Florida water activities.

• Population decrease: This will affect a number of concessions and companies in Europe in the longer term.

[1] People served by contract awards, 1987-2004 These databases exclude France, Spain (with two exceptions) and the USA due to the contract award details in these countries not being typically available and individually of a small and non-specific nature. The average contract award in France for example covers 2,000 people.

Water Wastewater Net Number 1987 6.90 1.50 6.90 1 1988 0.54 0.00 0.54 1 1989 40.47 52.25 40.47 13 1990 2.50 1.60 4.10 2 1991 1.88 0.30 1.88 2 1992 0.70 0.80 0.98 3 1993 20.16 9.39 21.29 15 1994 7.90 1.48 8.35 14 1995 7.45 2.86 7.49 18 1996 17.73 3.72 18.13 19 1997 51.20 20.27 51.39 26 1998 19.25 4.48 20.16 25 1999 39.78 26.60 41.83 49 2000 41.03 19.47 52.15 58 2001 22.10 16.74 31.36 54 2002 10.06 13.43 23.13 29 2003 22.87 15.41 28.07 42 2004 13.84 6.94 18.64 44 Total (million people) 326.36 197.24 376.66 410

Not all water privatisations are fated to be subsumed within other companies, even though this sometimes appears to be the fate of the British water sector. In general, market listings to date have come about through government or municipal privatisations. Market flotations since 2000

Company Country Vendor IPO Current status EYDAP Greece Government 2000 Further sale considered in 2003 Veolia Environnement France Vivendi 2000 Veolia now non-consolidated Nanhai Development China Municipality 2000 N/A Acegas Italy Municipality 2001 N/A EYATH Greece Government 2001 N/A Nature Tech UK Private 2002 N/A ASM Brescia Italy Municipality 2002 N/A Darco Water Tech Singapore Private 2002 N/A Ranhill Utilities Malaysia Ranhill Bhd 2002 N/A PBA Holdings Malaysia Government 2002 N/A Northumbrian Water UK Suez 2003 Post IPO refinancing in 2004 Hera Italy Municipality 2003 Acquiring other ATOs Meta Modena Italy Municipality 2003 N/A Salcon Singapore Private 2003 N/A Jiangxi Hongcheng China Municipality 2004 N/A Asia Env Holdings Singapore Private 2004 N/A



[2] Published data on service extension subsequent to the contract award Examples of service extension identified include Metro Manila (water service extension by both concessions), Aguas Argentinas (water and sewerage extension), EMOS (water extension to marginal areas), Aquafin (extending sewerage in the Flanders region of Belgium) and various contracts in Brazil, Malaysia and so on. In many cases the service extension seen to date is a partial picture. [3] The long established markets There were six markets with an extensive private sector presence it the start of 1987: the USA (mainly regulated activities, rather than the non-regulated O&M outsourcing contracts that have become a feature of the past decade); France (the private sector share has advanced from 72% in 1987 to 79% by 2004); Italy (11% of the market served by the private sector and semi-private companies in 1987); Spain (the private sector share has advanced from 35% in 1987 to 46% by 2004); Germany (Gelsenwasser and some local companies holding approximately 8% of the market through long term contracts) and; England & Wales (there were 29 Statutory Water Companies serving 14million people in 1987).

Country Comments Million people England & Wales SWCs in operation in 1987 13.8 USA Non-regulated activities 35.6 USA Regulated activities 22.5 Germany PSP since 1887 5.2 Italy Mainly pre ATO contracts 6.5 Spain PSP since 1867 19.0 France PSP since 1853 49.0 Total 151.6

To count as private sector participation, contracts have to be of at least five years in duration and either a formally established O&M contract, a concessional contract or an outright asset privatisation. In this context, national private water service companies are defined as legal entities that have signed a formal contract with the relevant municipal or state authorities for the provision of water or wastewater services. In order to distinguish between such contracts and formal or quasi legal contracts drawn up with small local entities, these contracts also cover at least 10,000 people. Contracts for industrial water services or for developing industrial zones are excluded. A global figure

Contract type Million people Contract awards 376.7 Contract service extension 8.5 Population growth & urbanisation 8.2 Incumbent markets 151.6 Global total 545.0

In 2003, we identified 485million people being served by PSP, compared with the current year estimate of 545million. Apart from the net gain of 10.4million, the increase is due to identifying other contracts and companies, a revised estimate of the coverage in the ‘traditional’ markets and more extensive information about contract service extension. Trends identified In terms of contracts awarded, 2004 looks set to be the weakest year since 1998 or 1966 and in net terms, it currently looks like being the weakest year since 1995. Yet the figures do not point to a collapse in the privatisation process. The projects currently under development, from Nepal to Northern Ireland and indeed, from Project Alpha to Project Omega suggest that this level of activity will at least be maintained in the next two to three years and may well increase. Number of contracts awarded

Water Wastewater Combined Contracts 1987 0 0 1 1 1988 1 0 0 1 1989 3 0 10 13 1990 1 1 0 2 1991 1 0 1 2



Water Wastewater Combined Contracts 1992 1 1 1 3 1993 8 3 4 15 1994 5 3 6 14 1995 7 1 10 18 1996 12 2 5 19 1997 12 4 10 26 1998 12 5 8 25 1999 15 6 28 49 2000 26 16 16 58 2001 17 18 19 54 2002 11 10 8 29 2003 18 8 16 42 2004 20 10 9 39 Total 170 88 152 410

The volume of contracts remains high, underlining the development of local, small scale contract awards, especially for water. Wastewater only contracts continue to be scarcer, reflecting their lower perceived priority. Millions of people served per contract

Water Wastewater Net 1987 6.90 1.50 6.90 1988 0.54 0.00 0.54 1989 3.11 5.23 3.11 1990 2.50 1.60 2.05 1991 0.94 0.30 0.94 1992 0.35 0.40 0.33 1993 1.68 1.34 1.42 1994 0.72 0.16 0.60 1995 0.44 0.26 0.42 1996 1.04 0.53 0.95 1997 2.33 1.45 1.98 1998 0.96 0.34 0.81 1999 0.93 0.78 0.85 2000 0.98 0.55 0.90 2001 0.61 0.45 0.58 2002 0.53 0.75 0.80 2003 0.67 0.64 0.67 2004 0.48 0.37 0.42 Average 1.01 0.82 0.92

Wastewater contracts tend to be smaller, due to a number of major bulk water contracts as well as sewerage services being less extensive than water provision services at the start of a typical privatisation. The average contract size has eased since 2000, reflecting a trend towards smaller, more localised contracts and fewer of the major privatisations such as Buenos Aries, Manila and Jakarta. Distribution of contract awards – by region

Water 1985-99 1990-94 1995-99 2000-04 Europe 39.86 1.57 17.35 24.77 Americas 0.00 20.73 50.19 22.64 Asia 1.49 9.56 53.70 48.66 ME & Africa 7.25 1.28 14.81 13.62 Total 48.60 33.14 136.05 109.69

Wastewater 1985-99 1990-94 1995-99 2000-04 Europe 55.03 3.54 18.41 23.27 Americas 0.00 9.73 34.09 12.11 Asia 0.00 0.30 3.48 30.98 ME & Africa 1.50 0.00 1.96 5.69 Total 56.53 13.57 57.94 72.05



Europe’s figures are marked by two especial trends; the privatisation of the water and sewage companies of England & Wales in 1989 and gradual impact of the Galli Law in Italy from 1999. While contract activity has decreased materially in the Americas since 2000, it has remained at least steady in Asia due to the expansion of the market in China and the emergence of the market in India and has materially increased in Africa and the Middle East.

Distribution of contract awards – by awardee

Water 1985-99 1990-94 1995-99 2000-04 Local – Developed 39.86 0.00 4.08 16.29 Local – Developing 0.60 4.88 26.20 26.04 Expatriate Chinese 0.00 0.00 8.99 5.35 Multinational 8.14 28.56 96.14 62.22 Total 48.60 33.14 136.05 109.69

Wastewater 1985-99 1990-94 1995-99 2000-04 Local – Developed 55.03 1.66 4.56 12.97 Local – Developing 0.00 0.30 17.20 18.96 Expatriate Chinese 0.00 0.00 0.00 2.63 Multinational 1.50 11.61 36.28 37.48 Total 56.53 13.57 57.94 72.05

It appears that a shift away from contracts being awarded to multinational companies to local and expatriate companies is taking place. This shift is even more dramatic when you consider reflects at Brazil’s SABESP (partly privatised in 1996) served 24million people. While these changes are in part due to the problems encountered by multinational companies since the mid 1990s, especially regarding political and foreign exchange risk, it also demonstrates that local capacity building is starting to have an effect. This is not necessarily a good thing as while local or expatriate funding obviates exchange rate risk, it plays a limited role in mobilising new sources of funding needed to attain the Millennium Development Goals as expatriate funding has only been identified being used in China to date. In China, legislation was passed in 2002 outlawing fixed returns on investment for water or wastewater projects by held and operated by international entities. As a result Berlinwasser and RWE Thames sold back their holdings in two projects back to state held entities. This legislation does not apply to projects funded and operated by domestic companies and companies such as Beijing Capital and Shanghai Industrial Holdings operate contracts on a fixed rate of return basis.



COUNTRY MARKET DEVELOPMENT, PROSPECTS AND PROGNOSIS The addressable population is the percentage of the population (2003 figures) that the author believes have a better than even chance of being served with privatised water and/or sewerage provision by 2015. The year 2015 may appear a long way off, but it does allow for current political, regulatory and market trends to be translated into realistic market developments, while allowing for five years of contract award and implementation slippage for political and economic changes. The table below consists of a set of estimates for the current extent of private sector participation in water and sewerage services for the main markets, along with forecasts for the potential extent of private sector penetration by 2015.

Served by private sector in 2004 Potentially privatised by 2015 Water Sewerage Water Sewerage

Western Europe Austria 1% 0% 10% 15% Belgium 3% 41% 5% 55% Denmark 1% 0% 1% 0% Finland 1% 0% 2% 0% France 79% 56% 85% 75% Germany 16% 14% 25% 35% Greece 41% 41% 45% 45% Ireland 1% 36% 25% 45% Italy 35% 27% 55% 45% Netherlands 0% 10% 0% 15% Norway 1% 5% 5% 10% Portugal 12% 5% 45% 55% Spain 46% 54% 65% 70% Sweden 1% 0% 5% 5% Switzerland 0% 0% 0% 0% United Kingdom 87% 92% 98% 96%


Central & Eastern Europe Albania 16% 16% 25% 30% Armenia 29% 0% 30% 30% Bulgaria 15% 15% 50% 65% Croatia 0% 17% 20% 30% Czech Republic 59% 56% 90% 90% Estonia 29% 29% 35% 35% Hungary 27% 26% 35% 45% Latvia 0% 0% 25% 25% Lithuania 0% 0% 20% 0% Poland 2% 2% 10% 15% Romania 11% 0% 25% 20% Russia 1% 0% 10% 10% Slovakia 3% 3% 30% 30% Slovenia 0% 8% 25% 25% Ukraine 0% 0% 5% 5%




Americas Argentina 45% 38% 65% 60% Belize 58% 31% 60% 45% Bolivia 16% 9% 30% 25% Brazil 17% 12% 30% 25% Canada 4% 3% 10% 10% Chile 97% 94% 98% 98% Colombia 7% 5% 20% 20% Cuba 16% 0% 20% 10% Dominican Republic 36% 0% 40% 25% Ecuador 20% 20% 35% 35% Honduras 4% 4% 15% 15% Mexico 16% 9% 20% 25% Panama 12% 0% 50% 50% Peru 3% 0% 30% 25% Trinidad & Tobago 0% 0% 100% 100% Uruguay 11% 11% 50% 45% USA 14% 6% 35% 20% Venezuela 16% 0% 25% 10%


Middle East & North Africa Bahrain 0% 0% 100% 100% Egypt 1% 1% 8% 10% Iran 0% 0% 0% 0% Israel & Palestine 10% 0% 15% 10% Jordan 38% 0% 45% 25% Kuwait 0% 79% 100% 100% Lebanon 0% 0% 30% 35% Morocco 19% 2% 35% 30% Oman 0% 0% 25% 50% Qatar 0% 0% 30% 45% Saudi Arabia 0% 0% 25% 30% Tunisia 0% 0% 15% 10% Turkey 2% 1% 10% 10% UAE 0% 14% 15% 35%




Sub Saharan Africa Burkina Faso 9% 0% 20% 10% Cameroon 33% 0% 45% 20% Central African Rep 25% 0% 40% 35% Chad 0% 0% 45% 30% Congo 2% 0% 20% 15% Côte d’Ivoire 31% 18% 40% 30% Gabon 38% 0% 45% 30% Ghana 0% 0% 50% 40% Guinea 15% 0% 20% 20% Guinea-Bissau 0% 0% 0% 0% Kenya 0% 0% 20% 10% Lesotho 0% 0% 0% 0% Mali 1% 0% 25% 15% Mozambique 13% 0% 30% 15% Namibia 0% 7% 0% 10% Niger 5% 0% 10% 5% Nigeria 0% 0% 20% 15% Senegal 38% 0% 50% 20% South Africa 2% 1% 8% 5% Tanzania 8% 0% 25% 20% Uganda 0% 0% 25% 15%

Served by private sector in 2004 Potentially privatised by 2015

Water Sewerage Water Sewerage South East Asia & Australasia

Australia 14% 6% 35% 30% China 4% 2% 15% 20% Hong Kong 74% 0% 90% 40% Indonesia 3% 0% 15% 5% Japan 0% 0% 5% 15% Macao 100% 0% 100% 100% Malaysia 58% 0% 85% 65% New Zealand 1% 10% 5% 15% Philippines 10% 2% 40% 30% Singapore 17% 0% 25% 0% South Korea 0% 7% 10% 25% Taiwan 0% 14% 15% 30% Thailand 2% 0% 65% 50% Vietnam 0% 0% 5% 5%

Served by private sector in 2004 Potentially privatised by 2015

Water Sewerage Water Sewerage South & Central Asia Bangladesh 0% 0% 12% 5% India 0% 0% 5% 5% Kazakhstan 0% 0% 20% 10% Mongolia 0% 0% 10% 20% Nepal 0% 0% 15% 15% Pakistan 0% 0% 10% 5% Sri Lanka 0% 0% 25% 15%

The potential for private sector participation Not all markets are suitable for privatisation, even on a 25 or a 50 year view. For example, with the exception of the most liberalised and economically developed markets, only people living in urban areas are likely to benefit from private sector service provision under current circumstances. In 1999, 5% of the world’s population was served to some extent by the private sector. By late 2004, this had increased to 9% of 6,270million people (2003 population data).



Current and forecast extent of private sector participation

Million people 2004 2015 Western Europe 175 45% 205 53% C&E Europe 18 5% 60 18% ME & Africa 44 4% 120 10% South Asia 2 0% 45 3% Central Asia 0 0% 10 5% South East Asia 130 6% 345 16% Oceania 4 10% 10 29% North America 62 19% 120 36% Latin America 110 21% 210 35% World total 545 9% 1,125 16%

Our revised forecast for the extent of PSP in 2015 has a fall of 35million from the previous forecast of 1,160million people (17% of the 2015 population). This is due to the North America forecast falling by 60million, and only being partially offset by a 10million increase in Western Europe, 5million for Central & Eastern Europe and 10million for South Asia. The figures for privatisation to date demonstrate the variable progress that the private sector has made. In Western Europe, private sector service provision is already becoming commonplace, which can be related to the global domination of international markets by a number of companies from this region. The forecasts for most other regions with the exception of the Americas are on the cautious side for the time being. What is notable is the gap between the estimation of the addressable populations in the Americas and the extent of privatisation to date. What has been consistently evident over the past years is that nothing can be taken for granted when it comes to assessing market developments and prospects. The Russian Federation was seen as ‘unsuitable before perhaps 2050’ as recently as three years ago. Now a market is emerging, especially in Moscow and St. Petersburg. India was beyond most boundaries, characterised by blocked initiatives and mothballed plans. Now not only have a number of contracts been awarded since 2002, but also the new Congress Government has made it clear that PSP is to be highlighted as a method for mobilising new resources.


NATIONAL AND INTERNATIONAL PLAYERS AND STRATEGIES COMPARED Taking a look at the corporate development of the sector through the number of companies identified by the author over the past five editions of the Yearbook is, as of necessity, an impressionistic exercise. It is nevertheless a useful one as it reflects those companies which are in the public domain. Company entries by country 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Argentina 0 0 0 0 0 1 Austria 0 0 1 1 1 2 Belgium 1 1 1 1 1 1 Brazil 1 1 1 1 1 1 Canada 0 0 0 0 0 1 Chile 1 1 1 1 1 4 China 4 6 7 7 9 16 Czech Republic 1 1 1 0 0 1 France 3 3 3 3 3 3 Germany 5 5 5 4 4 4 Greece 0 1 2 2 2 2 India 0 0 0 0 1 2 Italy 5 9 8 8 12 12 Malaysia 3 3 2 6 10 10 Mexico 0 0 0 0 0 1 Netherlands 0 1 1 1 1 1 Philippines 0 0 0 0 2 3 Saudi Arabia 0 0 0 0 0 1 Singapore 0 0 0 0 4 6 Spain 6 8 8 8 8 7 Thailand 2 1 1 1 1 1 United Kingdom 18 16 15 17 18 17 USA 20 24 25 23 23 20

Synthesis of the results For our purposes, OECD countries are those of the EU and North America. Advanced developing countries are chiefly Singapore, Chile and Saudi Arabia and developing countries cover other economies such as Malaysia and Brazil.

1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Number of companies 70 81 82 84 102 117 Number of countries 13 15 16 15 18 23 - OECD countries 59 69 70 68 73 72 - Advanced developing 1 1 1 1 5 12 - Developing 10 11 11 15 24 33

When looking at the company entries and contract awards to date, there appears to be a shift away from the global market leaders to more diverse and local management and financing solutions. These entries highlight the notable development of activities in the sector by companies based in China, Malaysia and Singapore. Other players are emerging across Latin America and in the Philippines and even India, thus compounding a trend away from European and Western company experience and finance operating globally towards more local applications. Size, home and abroad The table below needs to be approached with some circumspection. While numbers served in ‘home’ contracts typically refer to contracts where the company has a majority holding of a concession, ‘international’ contracts (here defined as being outside the country of the company’s registration) may well involve relatively small stakes. Where companies have minority shareholdings in contracts managed by other water companies, these have been ignored. These also exclude companies which only serve industrial water customers or where no reliable customer data is available.


Numbers served by companies in their home and international markets

Company Home International Total % Home Argentina Latin Aguas 1,837,000 0 1,837,000 100% Austria Aquaplus 10,000 190,000 200,000 5% EVN 467,000 1,494,000 1,961,000 24% Belgium Aquafin 3,300,000 0 3,300,000 100% Brazil SABESP 25,100,000 0 25,100,000 100% Chile Aquaplus 768,000 0 768,000 100% Chile Aguas Andinas [1] 5,510,000 0 5,510,000 100% Antofagasta 454,000 0 454,000 100% Consorcio Financiero 1,912,000 0 1,912,000 100% Flabella 1,137,000 0 1,137,000 100% China Anhui Guozhen 255,000 0 255,000 100% Beijing Capital 5,800,000 0 5,800,000 100% Beijing Sound 5,000,000 0 5,000,000 100% Cathay International water 4,000,000 0 4,000,000 100% Cheung Kong Infrastructure 0 348,000 348,000 0% Golden Green Tech Group 800,000 0 800,000 100% Guangdong Investment 5,800,000 0 5,800,000 100% Interchina Holdings 1,790,000 0 1,790,000 100% Jiangxi Hongcheng Waterworks 1,550,000 0 1,550,000 100% Nanhai Development Ltd 1,100,000 0 1,100,000 100% Shanghai Industrial Holdings 1,750,000 0 1,750,000 100% Suzhou New District 100,000 0 100,000 100% Czech Republic Penta Finance 1,027,000 0 1,027,000 100% France Bouygues 6,000,000 27,525,000 33,525,000 18% Suez 17,000,000 100,367,000 117,367,000 14% VE 26,000,000 82,153,000 108,153,000 24% Germany Gelsenwasser 5,730,000 321,000 6,051,000 95% MVV 1,050,000 0 1,050,000 100% RWE 26,850,000 42,605,000 69,455,000 39% Greece Athens Water 4,000,000 0 4,000,000 100% Thessaloniki Water 850,000 0 850,000 100% India BHEL 100,000 0 100,000 100% IVRCL 100,000 0 100,000 100% Italy ACEA 6,770,000 6,745,000 13,515,000 50% Acegas 575,000 0 575,000 100% ASCM Como 250,000 0 250,000 100% ASM Brescia 513,000 0 513,000 100% ADF 350,000 0 350,000 100% A Nicolay 110,000 0 110,00 100% A Potabili 950,000 0 950,000 100% Amga 1,340,000 0 1,340,000 100% Enel 1,396,000 45,000 1,441,000 97% ENI 5,940,000 0 5,940,000 100% Hera 2,000,000 0 2,000,000 100% Meta Modena 324,000 0 324,000 100% Malaysia Intan Utilities 600,000 0 600,000 100% K P Selangor 500,000 0 500,000 100% PBA Holdings 1,260,000 250,000 1,510,000 83% PPB 0 250,000 250,000 0% Puncak Niaga 4,100,000 0 4,100,000 100%


Company Home International Total % Home Ranhill Utilities 2,000,000 250,000 2,250,000 89% Salcon 500,000 1,250,000 1,750,000 29% Taliworks 500,000 0 500,000 100% YTL Holdings 0 2,397,000 2,397,000 0% Philippines Ayala 3,400,000 0 3,400,000 100% Benguet 27,000 0 27,000 100% Benpres 4,300,000 0 4,300,000 100% Saudi Arabia Amiantit 0 1,227,000 1,227,000 0% Singapore Asia Environment 0 400,000 400,000 0% Darco 0 450,000 450,000 0% Hyflux 700,000 0 700,000 100% Spain Agbar [2] 15,000,000 20,216,000 35,216,000 43% Agval [3] 2,040,000 150,000 2,190,000 93% FCC [4] 9,500,000 5,899,000 15,399,000 62% Ferrovial 650,000 0 650,000 100% Gruppo ACS 2,200,000 2,100,000 4,300,000 51% Iberdrola 0 760,000 760,000 0% OHL 750,000 0 750,000 100% Tecasva 0 8,470,000 8,470,000 0% UK AWG 5,792,000 5,790,000 11,582,000 50% Biwater 500,000 2,099,000 2,599,000 19% Bristol Water 1,066,000 0 1,066,000 100% South Downs 647,000 0 647,000 100% Dee Valley 258,000 0 258,000 100% Glas Cymru 3,043,000 0 3,043,000 100% East Surrey 560,000 0 560,000 100% Kelda Group 5,467,000 677,000 6,144,000 89% Northumbrian Water 6,296,000 246,000 10,007,000 63% Pennon Group 1,516,000 0 1,516,000 100% First Aqua 4,170,000 0 4,170,000 100% Severn Trent 8,280,000 6,049,000 14,329,000 58% South East Water 1,500,000 0 1,500,000 100% South Staffordshire 1,233,000 0 1,233,000 100% Swan Group 563,000 0 563,000 100% United Utilities 10,323,000 11,805,000 22,128,000 47% USA Alliance 229,000 0 229,000 100% American States 1,225,000 0 1,225,000 100% Aqua America 2,525,000 0 2,525,000 100% Artesian 265,000 0 265,000 100% BIW 37,000 0 37,000 100% California WS 1,700,000 0 1,700,000 100% CH2M Hill 4,750,000 250,000 5,000,000 95% Connecticut 302,000 0 302,000 100% Consolidated Water 0 46,000 46,000 0% Covanta 400,000 0 400,000 100% Middlesex 385,000 0 385,000 100% Pennichuck 138,000 0 138,000 100% SJW 990,000 0 990,000 100% Southwest 2,300,000 0 2,300,000 100% Tyco 1,500,000 4,963,000 6,463,000 23% York 153,000 0 153,000 100%

[1] Included in Agbar and Suez as well. [2] Included in Suez as well. [3] Included in Bouygues as well. [4] Included in VE as well. RWE has stated that it is considering the future of all of its activities outside Europe and the Americas. Apart from some contracts in the USA and Puerto Rico in 2003 and the sale of its stake in FCC in 2004, VE has concentrated on divesting its engineering activities rather than closing down its international activities. This may


reflect the frustration the company felt when it divested its minority stakes in UK companies in 2001-02 to prepare for the acquisition of Southern Water only to have the entire process thwarted by political interference. Despite the changes and challenges of the past few years, Suez, VE and RWE have succeeded in developing a significant global presence both in terms of numbers served and countries addressed. In each case, this has been built upon a major presence in their home market. The other major international companies are Bouygues, Agbar, United Utilities, Cascal (Biwater/Nuon), Earth Tech, Severn Trent and Tecasva. AWG is slowly selling off its international activities. Beyond these companies, there is a dramatic fall-off in the number of people served outside home markets. ACEA is not seeking further concessions in Latin America, but is holding on to those it has already gained.


PART 2: COUNTRY ANALYSIS

ALBANIA PART 2: COUNTRY ANALYSIS

25 Masons Water Y earbook 2004 – 2005

ALBANIA After some years of consulting work and management alliances, a number of moves are developing for a concession serving Tirana and other PSP projects.

Economics (2002) GDP per capita US$1,300 GDP per capita (PPP) US$3,860 GDP in Agriculture 53% GDP in Industry 26% GDP in Services 21%

Water and sewerage infrastructure Water and sewerage services are managed by the Ministry of Public Works, Territory Adjustment and Tourism and the Committee of Environmental Protection and the National Water Committee. 40% of households do not have basic sanitation while less than 50% of urban or rural water supplies are considered to be satisfactory. At present, all sewage effluents are untreated and leakage from sewerage systems is known to be affecting drinking water supplies. Water quality related epidemics such as cholera and poliomyelitis have occurred in recent years. Untreated effluents are also used for irrigation, affecting the soil quality, and leading to health problems.

Population 2002 (million) 3.1 2015 (million) 3.4 Urbanisation in 2002 43% Urbanisation by 2015 52% In urban agglomerations, 2015 0%

Privatisation plans In 1999, the EU’s PHARE programme supported the design and construction of a wastewater treatment plant for the cities of Vlora and Pogradec, as well as wastewater treatment plants and drinking water supply for Saranda. A total of €46 million was invested in Albania that year. Legislation transferring responsibility for water supplies to communes and municipalities and allowing PSP was enacted in July 2000. Additional resources will be required to rehabilitate water supply systems in areas other than Tirana and Durres, and to improve sewerage systems throughout the country. In 2003, the World Bank approved a US$15 million Municipal Water and Wastewater Project to support the government's efforts to implement institutional and financial reforms in the water supply and sanitation sector. Management contracts In 2003, Berlinwasser International (60%, VE and RWE) and Aquamundo (40%, Amiantit of Saudi Arabia) gained a five year €4m contract to take over management of water supply and wastewater disposal in the Albanian towns of Durres, Fier, Lezhe and Saranda, serving 450,000 people. Aquamundo also operates the drinking water and wastewater disposal services in the town of Kavaja, with 77,000 inhabitants. Berlinwasser has a 30 year water and wastewater concession for the town of Elbasan.

Freshwater Annual availability (2000) 23.0km 3 Per capita 8,646m 3 Annual withdrawal (1994) 1.4km3 Domestic (1987) 29% Industrial (1987) 0% Agriculture (1987) 71%

Amga and ACEA both hold 32% of Tirana Acque, an Italian consortium formed to take advantage of bilateral agreements between Italy and Albania. Their long-term aim is to be involved in the privatisation of the Greater Tirana Water Supply and Sewerage Enterprise. In 2001, they gained a €10.5 million four year management contract for the city, serving 650,000 people.

Groundwater Annual availability (2002) 6.2k3 Per capita 2,248m 3 Annual withdrawal (1989) 0.6km3 Domestic (1987) 48% Industrial (1987) 0% Agriculture (1987) 52%

ALGERIA PART 2: COUNTRY ANALYSIS


ALGERIA Service expansion plans All water and sewerage services , where provided on an organised basis, are provided by the state. Finance is currently provided by the state, along with World Bank, African Development Bank and the EIB providing project funding. 83% of the urban population receives piped water and the country has 49 wastewater treatment works, with a total PE of 3.7million. A further ten facilities with a capacity of 1.2million PE were constructed, and entered service in 2000. Extending sewage treatment to the rest of the population living in the 13 major cities will cost an estimated US$450 million by 2020. Extending water and sewerage services to the 1.1million people living in the 75 secondary towns and cities by 2025 will cost a further US$2 billion for water and US$4 billion for sewerage and sewage treatment. Urban water distribution losses were estimated at 40% in 2003. Privatisation prospects The Algerian government’s Agence Nationale de l’Eau Potable et Industrielle et de l’Assainissement is seeking to open the water industry to private sector finance and management. By reforming the sector it hopes to attract both domestic and foreign capital to finance improved water supply, wastewater collection, and in the longer term to develop water treatment systems for rural communities. The government hopes that higher oil prices will allow the government to implement postponed infrastructure projects including the construction of dams, reservoirs and water distribution systems. Algerienne des Eaux (ADE) is owed DZD 25 billion (€293 million) because of irregular payments by customers and illegal connections. ADE announced in July 2003 that it would install 190,000 water meters and that it’s long-term plans included handing over management to private companies. The Government seeks to introduce privatisation in stages, from management contracts towards full concessions as the regulatory climate evolves to be able to manage these contracts. Currently, interest is focussing on the Arzew independent water and power project, the first IPP in the country. Algeria's Ministry of Water Resources is to restructure water rates for industrial consumers from 2004. In 2003, 70% of the cost of water was subsidized by the government. Suez had talks with the government about developing a series of BOT concession propos als and VE put forward proposals for two management and systems contracts for Algiers and Constantine, but it appears unlikely that these are being actively pursued by the companies. The Algerian Energy Company is seeking bids for a DBFO contract to build the 200,000m 3 per day Hamma desalination plant in an Algiers suburb. Three groups have been shortlisted: Ionics (USA) and Mitsui (Japan), Barna Invst (Spain) and Pridesa (RWE), and Cobra-Abensur-Codesa with Sadyt. The facility will be operated with AEC and Algerienne des Eaux.

ARGENTINA PART 2: COUNTRY ANALYSIS


ARGENTINA The 1993 privatisation of Buenos Aires’ water and sewerage services marked the real beginning of the current global wave of international privatisations in terms of publicity and value. While in performance terms, the various concession contracts have held their own, the continuing economic crisis has resulted in severe losses for international contracts.


Regulation and management Communities with a population of more than 15,000 are covered by the Programa Nacional de Optimización, Rehabilitación y Ampliación de Servicios de Agua Potable y Alcantarillado Claocal (PRONAPAC). This programme seeks to provide universal water provision and sewerage services on a financially self-supporting basis through the encouragement of private sector participation and is being supported by the World Bank. The Programme for Drinking Water and Sanitation (Préstamo BID 857-OC/AR) covers communities with a population of 500-15,000. It seeks to develop a suitable level of service to be provided by the municipalities. For smaller communities, the Basic Drinking Water and Sanitation Programme (PASPAyS) is concentrating on public health concerns.


Universal coverage remains a longer term aim Currently, 22% of Argentina’s population lack drinking water services, while 58% are without improved sanitation. During 2004 and 2005, Argentina plans to spend US$325 million on expanding water and sewage services, involving 1,063 projects to extend water and sewage services to 6.8million people in rural and urban areas.

Urban Data Served by piped water 87% Access to sewerage 53% With sewage treatment 5%

Private sector participation Privatisation has been placed at the heart of the government’s plans for universal water and sewerage coverage in urban areas. In 2004, some 16.2million of the people living in urban areas of Argentina (33million people) are being served by the private sector. This does not include the Tucuman cancelled concession (0.8million people).

Freshwater Annual availability (1998) 694.0km 3 Per capita 19,212m 3 Annual withdrawal (1985) 28.6km 3 Domestic (1987) 16% Industrial (1987) 9% Agriculture (1987) 75%

Groundwater Annual availability (1998) 128.0km 3 Per capita 3,543m 3 Annual withdrawal (1975) 4.7km3 Domestic (1987) 11% Industrial (1987) 9% Agriculture (1987) 72%

In February 2002, Azurix cancelled its contract with the Buenos Aires province, handing over the concession to the operational company. South Water of Argentina bought out the Azurix stakes in the SAUR led consortia.

ARGENTINA PART 2: COUNTRY ANALYSIS


Another local company, Latin Aguas has become a major regional player, operating three concessions in northern Argentina.

MAJOR CITIES City 2000 2015 Status Buenos Aires 12,024,000 13,185,000 Aguas Argentinas privatised in 1993 Cordoba 1,368,000 1,613,000 Water and sewerage concession in 1997 Rosario 1,279,000 1,523,000 Privatisation under consideration Mendoza 934,000 1,165,000 Water provision BOT awarded in 1998 Tucumán 792,000 1,032,000 Water provision BOT awarded, then cancelled

Aguas de Santa Fe and Cordobesas and the Peso Crisis The Aguas Argentinas concession is discussed in the Suez entry. It is not the only Suez led concession so affected: Aguas Provinciales de Santa Fe is being obliged to draw up future investment targets having fallen behind on service expansion work since 2000. It supplies water to 1.8million people and wastewater services to 1.2million in 15 cities, including Santa Fe and Rosario. Aguas Cordobesas is paying 20million pesos (US$6.7 million) in concession fees owed to the government of Cordoba, Argentina and to spend US$1.7 million to expand its water network to cover 98% of the city’s1.3million people as a settlement to allow for tariff increases.

Private sector contracts awarded (Please see relevant company entry for details) Location Contract Company Missiones 30 year water and sewerage concession Urbaser Aguas del GBA 30 year water and sewerage concession Urbaser consortium La Planta 30 year water and sewerage concession South Water Bahia Blanca 30 year water and sewerage concession South Water Conurbano 30 year water and sewerage concession Aguas de Gran Bilbao Mendoza 95 year water provision BOT Obras Sanitarias de Mendoza Escobar Water provision concession Aguas de Valencia Cordoba 30 year water and sewerage concession Suez/Agbar Santa Fe 30 year water and sewerage concession Suez/Agbar Buenos Aries 30 year water and sewerage concession Aguas Argentarias Catamarca 30 year water concession Proactiva Medio Ambiente Laprida Concession, water & sewerage Aguas de Laprida Balacarse Concession, water & sewerage Aguas de Balacarse Rioia Concession, water & sewerage Aguas de La Rioia Salta Concession, water & sewerage Aguas de Salta Corrientes Concession, water & sewerage Aguas de Corrientes

Private sector company operations (Please see the relevant company entry for details) Company Parent company Population served (country) Water Sewerage Total Urbaser Dragados (Spain) 2,100,000 2,100,000 2,100,000 A Laprida & Balacarse Camuzzi (Italy) 45,000 45,000 45,000 Conurbano AGB (Spain)/Sideco (Argentina) 1,700,000 1,700,000 1,700,000 OS de Mendoza SAUR (France) 1,200,000 880,000 1,200,000 Aguas Argentarias Suez (France)/Agbar (Spain) 7,800,000 5,800,000 7,800,000 Aguas Cordobesa Suez (France)/Agbar (Spain) 1,300,000 1,300,000 1,300,000 A P de Santa Fe Suez (France)/Agbar (Spain) 1,707,000 1,125,000 1,707,000 Proactiva FCC (Spain)/VE (France) 200,000 0 200,000 AgVal Aguas de Valencia (Spain) 150,000 0 150,000 Aguas de La Rioia Latin Aguas (Argentina) 190,000 29,0000 190,000 Aguas de Salta Latin Aguas (Argentina) 1,016,000 675,000 1,016,000 Aguas de Corrientes Latin Aguas (Argentina) 148,000 473,000 148,000

ARMENIA PART 2: COUNTRY ANALYSIS


ARMENIA Municipalities are responsible for the water supply and wastewater treatment of communities. The municipal wastewater and water supply investment costs are financed mainly by municipalities themselves, and operation and maintenance costs, including capital costs, covered by the users in compliance with the Water Code. Public waterworks served some 75% of the population in 1991, but the supply facilities are well below a basic level. In addition, distribution losses are currently at 60-70%. Water supply systems are operated mainly by pumps. Due to the current energy crisis the operation of the pumps is essentially inadequate. Individual projects are prepared to turn the systems into gravitation supply. While Yerevan’s water company Ervodocanal CJSC supplied twice the required volume of water (250L per capita per day) in 2001, the city suffers from water shortages as the absence of charges has led to widespread wastage. Ervodocanal charges AMD1 (€0.0018) per m3 of water and effectively no revenue has been collected from consumers for decades. There are no water meters and water consumption is not properly monitored. An average of 2,500L of drinking water per capita is supplied every year. About 76% of the population were served by public sewer systems in 1991. The wastewater treatment in urban areas consists mainly of biological treatment. Industry generated close to 800million m3 of wastewater in 1994. Almost 50% is subject to secondary treatment, but, due to improper operation of the plants, allied with power shortages, wastewaters are mainly treated at the primary level, thus currently 20% of all wastewater is subject to secondary treatment. The Armenian Ministry for Nature and Environment Protection aims to implement a 10 year water resources programme that seeks to attract US$200 million (€229 million) during the first five years to modernise the water supply network, together with the implementation of economic incentives to conserve water. In 2001 the German Government contributed €29.1 million and the World Bank US$20 million. Average spending on water services by the government and industry between 1996 and 2001 has been estimated by the OECD at €5 million per annum. A US$88 million (€101 million) World Bank-supported Municipal Water and Wastewater Project was launched in 2003. The 46 district branches of the Armenia Water and Sewerage Company (AWSC) will be transformed into legally independent entities that can jointly or alone contract out with the private sector under different forms of private sector participation. A revised Water Code on water sector reform was adopted in October 2003. Private sector entities In December 1999, ACEA and Lotti and Associati e WRc gained an operations and management contract for Yerevan. The contract will serve 0.9million people for water management and will generate a turnover of US$4.5million pa. The World Bank made a US$30 million loan to Yerevan in 1998 for improving water services, especially in poorer areas.

AUSTRALIA PART 2: COUNTRY ANALYSIS


AUSTRALIA While water resources are scarce and the integrity of the water cycle is under threat in many areas, heavy urban water usage remains a problem, along with increasing urbanisation and population growth. Australia is also notable for the innovative manner in which the Adelaide privatisation has been used so as to create a regional hub for further private sector contract awards.


Water resources Australia has the lowest percentage of rainfall as run-off, the lowest amount of run-off, the least amount of water in rivers and the smallest area of permanent wetlands in the world. In addition, the country has the most variable rainfall and stream flow in the world, with inland waterways characterised by high turbidity (sediment loading) and salinity. The country is characterised by a dependence on groundwater resources and the over-development of its main river basins. As for renewable resources, 20% are fully utilised, and 15% of supplies come from groundwater resources. In much of inland Australia, groundwater is often the only practical water supply for the pastoral and mining industries and their associated communities. The Great Artesian Basin is of critical importance over a large area of eastern Australia. In the Perth region, groundwater constitutes about two-thirds of total water use and about 30% of the water supplied by the Western Australian Water Corporation. Australia has the highest per capita water storage of all countries , because of the variable rainfall. Australia’s storage capacity in major reservoirs totals some 81,000GL, or 3.7 times the developed resource. The bulk of water storage is concentrated in a few very large reservoirs. Australia’s 10 largest reservoirs hold about 50% of national capacity. In New South Wales, the 10 largest reservoirs contain 90% of that State’s storage volume. In 75% of lakes and reservoirs, chlorophyll levels are regarded as excessive. There is a clear link between the concentration of phosphorus in these waters and the amount of chlorophyll (or algae) present. Australia's National Dryland Salinity Program estimates that over 20% of surface water resources in South Australia are too saline for human consumption. Lost water resources are valued at around A$100 million each in some local supply catchments. Other costs attributed to salinity are A$130 million per year in lost agricultural production and A$100 million pa in damage to infrastructure. An A$300 billion national water grid linking the wet northern regions of Australia with the dry south was unveiled by private sector groups in 2004. The idea would be to create a self-sufficient water management scheme for Australia that would be developed through optimising water resources and reuse while minimising losses. The water grid would have annual running costs of around A$6 billion. Water use Total water use of Australia's major cities remained static between 1991 and 1998 despite a 12% increase in the total number of properties supplied. If the effects of the drought in 1998 were accounted for, the overall water usage would have declined. User-pays pricing and demand management is delivering benefits in improving the efficiency of water use in urban communities. Unaccounted for water in Australian urban water networks is relatively low at 16% of total deliveries. Unaccounted for water includes unmetered supplies such as street flushing and fire fighting, together with leakage. Water usage in an average household of 2.8 people ranges from 263,000L pa for Sydney to 700,000L pa for Darwin. Water is mainly used outdoors, with 30–55% spent mostly watering lawns and gardens. For example, water use in Darwin is about 700,000Lpa for detached houses but 323,000L pa for flats without gardens. Australia is wasting 92% of its city runoff water and 86% of its effluent water. The Commonwealth Scientific and Industrial Research Organisation (CSIRO) believes that storm water, treated sewage effluent, treated industrial discharges and household laundry and bathroom wastewater, could be used for irrigation of city parks, verges, ovals and other horticultural uses, along with a number of industrial processes, for cooling water, and for toilet flushing. Between 1998 and 2002, the re-use of effluent has doubled to 14%, due to A$300 million (US$163 million) investment around the country. Savings of A$1-5 for every 10 kilolitres of water recycled are achievable.




Management A national strategic framework for water reform was agreed through the Council of Australian Governments in February 1994. This created a structured programme of reform measures to achieve more efficient and sustainable water resource use. State and territory governments have prime responsibility for water resource management and implementation of the reforms. The Federal Government has a complementary role in the reform process in providing leadership and facilitating implementation, in the interest of promoting national outcomes. The reforms were implemented over the period to 2001, covering both rural and urban areas and include measures in relation to water pricing, water entitlements and trading, environmental requirements, institutional reform, public consultation and education, and research. Good progress has been made in implementing the reforms in the short time since they were agreed. In 2003, the Senate environmental committee announced the recommendation of the creation of a national policy. This would set targets for regulating and improving supplies, set efficiency standards, prepare management guidelines and coordinate monitoring and funding arrangements. Suitable pricing levels need to be set to encourage conservation. While Australia is the world’s driest continent, the average price for domestic water is A$1.64 per m3 (US$0.93), materially below the level charged in Japan, the UK and most of northern Europe. Perth is expected to need additional sources of potable water by 2005, Brisbane and Melbourne by 2015 and Canberra by about 2017. Water property rights systems are being addressed by the state governments under a framework of national principles. Transferable water entitlements are being developed so that they can be traded like any other commodity. In a system of transferable entitlements, water rights can also be bought or reserved to protect the environment. Most water agencies are adopting a full ‘user pays’ system, charging for water at close to its true supply cost, whereby all water consumed must be paid for. Environmental costs are based on a set of national principles on water for ecosystems and measures to promote integrated catchment management approaches. State governments have undertaken activities to promote water trading and initiated action to progress interstate water trading. Issues relating to groundwater management are also being examined through a national framework, as is management of stormwater and wastewater resources. Water quality is being addressed through the National Water Quality Management Strategy (NWQMS), which seeks to achieve a nationally consistent approach to water quality management, while allowing flexibility to respond to differing regional circumstances. The National River Health Program (NRHP) is developing the first national biological monitoring system for Australia's rivers, for the assessment of river health and related management action and State of the Environment reporting. Irrigation accounts for 70% of diverted river waters , with much of the remainder used for domestic consumption.

Urban Data Served by piped water 100% Water usage (L/day) 450 Access to sewerage 98%

Privatisation plans According to the Australian Council for Infras tructure Development in 2003, since 1993, more than US$1,100 million of public-private partnership contracts have been signed in the water industry. Privatisation is being carried out on a state by state basis, with a wide range of approaches and attitudes . Major water and sewerage projects currently under consideration number 12 and have a combined capital expenditure of A$2.7 billion. In Victoria, the State is seeking to privatise its water services in the medium term, while the 2003 Constitution (Water Authorities Bill) and the Water Legislation Bill are currently being debated to see if the private sector ought to be excluded from asset ownership. Currently, water resources are managed by three separate entities. Melbourne Water, the wholesale company for the city of Melbourne is currently to stay in state hands. This state is seen as the leader in market development terms. South Australia is seeking a BOOT approach. The Labor Party seeks to demonstrate that assets are returned to public ownership after a given time. In this context, United Water’s (UW) A$1,500 million 15 year BOOT for Adelaide is non-contentious, given that UW’s contract calls for a 20% fall in operating costs. Canberra is expected to privatise its water provision services in the medium term. Western Australia is developing a partnership basis, since it seeks to avoid too much contracting out, so that the municipalities hold on to their intellectual knowledge. The State of Queensland has restricted privatisation to one contract (Noosa) to date and Brisbane Water remains a council entity. In New South Wales, Sydney Water has been corporatised and bulk water provision is carried out by the private sector (see city study below). The A$1,200 million sewerage scheme is open to tender, and various bids have been received, including one from Sydney Water.

Freshwater Annual availability (1998) 343.0km3 Per capita 18,596m3 Annual withdrawal (1985) 15.1km3 Domestic (1987) 65% Industrial (1987) 2% Agriculture (1987) 33%



Companies noted Along with Suez, Veolia, RWE and UU a number of local players have been identified. Actew, a publicly held utility and the private Australian Gaslight Company have formed a JV Actew AGL, Australia's first multi utility entity. Actew retains ownership of Australia Capital Territory's (ACT's) water and sewerage assets, with the JV being responsible for service provision. United Group acquired the Maffra contract from RWE in 2004 and seeks to develop its BOT activities.

Groundwater Annual withdrawal (1983) 2.0km3 Domestic (1983) 0% Industrial (1983) 23% Agriculture (1983) 77%

MAJOR CITIES City 2000 2015 Status Sydney 3,907,000 4,467,000 Corporatised, private bulk water provision Melbourne 3,232,000 3,605,000 Water BOT, but no privatisation Brisbane 1,622,000 2,027,000 Privatisation not under consideration Perth 1,329,000 1,605,000 Privatisation not under consideration Adelaide 1,064,000 1,173,000 Privatised

Sydney Water becomes State Water In July 2004, Sydney Water was corporatised and renamed State Water. It will have an independent regulator and has been ordered to attain cost savings of A$1.7 billion (€966 million) between 2004 and 2014. The entity has suffered from years of project delays, especially related to management problems. Sydney’s Waterplan 21, the development blueprint for achieving sustainable water consumption by 2021 has been scaled back due to the abandoning of proposals for industrial water recycling, citing inadequate demand and funding cutbacks. The pipeline was to have taken effluent from upgraded treatment plants in the satellite cities of Liverpool and Glenfield. By 2010, the government had aimed to recycle 83 million L, but this target is now expected to be lowered. Sydney Water is increasing spending on its pipe network by 35% to A$38 million (€23.16 million) pa, along with pipe inspections costing a further A$36 million (€21.9 million). Around 200 leaks a day spring from the 21,000km of secondary pipes linking mains to households, while the overall rate of leakage was 10.7% as of in February 2004, or 188 Ml/day. About 7,000km of mains are inspected annually, with about 4,000km repaired each year, saving an estimated 38.8 megalitres of water each day. By June 2005, this saving is expected to rise to 60 megalitres.

Private sector contracts awarded (Please see relevant company entry for details) Location Contract Company Noosa Sewerage BOT Australian Water Services Sydney Water treatment BOT Australian Water Services Brisbane Sewage treatment DBO AWG Sydney Water treatment BOT North West Transfield Melbourne Water treatment BOT North West Transfield Adelaide Rural water treatment BOO International Water Noosa Water provision BOT CGE Australia Adelaide Water and sewerage concession United Water Ballarat Water treatment BOOT Thames Water Ballarat Sewage treatment BOT Black & Veatch

Private sector company operations (Please see the relevant company entry for details)

Population served Company Parent company (country) Water Sewerage Total

AWS Northumbrian/Suez (France) 1,000,000 35,000 1,035,000 United Water RWE (Germany)/VE (France) 1,200,000 1,200,000 1,200,000 Thames Water Intl. RWE (Germany) 110,000 0 110,000 CGE Australia VE (France) 35,000 0 35,000 NW Transfield United Utilities (UK) 350,000 0 350,000 International Water United Utilities (UK) 150,000 0 150,000

Water trading in the Murray River Basin Water trading has been used to encourage the optimal use of water for agricultural purposes in Australia, especially in the Murray-Darling River Basin in Victoria. Permanent and spot rights are traded on an exchange; the former giving the bidder the right to use the water in perpetuity, the latter is used to meet seasonal shortfalls.



The Spot Allocations market, Victoria 2000-03

A$per MI 2000 2001 2002 2003 Low High Low High Low High Low High Lower Murray 24 36 5 41 30 181 110 225 Mid Murray 20 33 5 35 30 340 92 220 Murrumbidgee 13 40 5 43 30 172 90 190

Source: Historic weekly prices quoted on waterexchange.com.au Permanent water trade by volume is considerably less in volume than temporary trade, but the price paid is higher, due to the nature of permanent water transfer and is much less affected by the seasonal allocations within authorities. These water licence values have risen from A$180 per Ml in 1994 to more than A$2,000 per Ml. In wet years with full dams, irrigators gain a 100% allocation and utilise all the water covered by the licence. But in dry years, governments can reduce allocations. Prices are related to seasonal supply and demand, which also varies from year to year. Likewise, price is affected by the availability of water rights on the market. Sources:

R Chapman & S Cuthbertson (1996, revised 1999). Sydney’s Water - A Suitable Case for Private Treatment? Viewpoint 80, World Bank Group, April 1999. White M. (2000). Running Down: Water in a Changing Land. CSIRO/Kangaroo Press, Sydney.

AUSTRIA PART 2: COUNTRY ANALYSIS


AUSTRIA EVN has taken a lead in opening up the Austrian market. It is known that a number of other water entities are keen to be allowed to develop their activities, especially in order to address opportunities in central and eastern Europe. Vienna Wasser has developed a joint venture towards this end.


Water and sewerage services Officially, all urban and rural households have access to safe water provision and sewerage services. In 1990, 28% of the population had no sewage treatment, while 7% had tertiary treatment, 60% secondary treatment and 5% primary treatment. The proportion of the population connected to sewerage services increased from 38% in 1980 to 72% in 1987. The sewerage service coverage has remained at this level. Most industrial plant has secondary treatment for effluents. More than 85% of effluent in terms of its chemical oxygen demand is subject to sewage treatment, which results in a 95% reduction of loads from these sources.


Inland water quality Class 1988 2001 1 9% 6% 1-2 18% 28% 2 39% 53% 2-3 21% 12% 3 10% 1% 3-4 2% 0% 4+ 1% 0%

Urban Data Served by piped water 100% Access to sewerage 95% With sewage treatment c99%

Development of sewage treatment

Sewerage and sewage treatment 1980 1990 2001 Tertiary 3.0% 7.0% 99.7% Secondary 25.0% 60.0% 0.1% Primary 10.0% 5.0% 0.2% Sewerage only 27.0% 0.0% 0.0% Not connected 35.0% 28.0% 14.0%

Compliance work and longer term plans The Austrian Government has been using EU legislation since the early 1990s and spending on sewerage and wastewater treatment infrastructure between 1998 and 2003 was at an average of US$655 million per annum. The cost for the maintenance, modernisation and expansion of existing sewage collection and treatment systems, is expected to be €10 billion between 2001 and 2012. Austria met its 2010 sewerage objectives in 2001 along with effective compliance with the EU UWWTD in 2002. The Austrian Waters Act of 1959 is regarded as a sound piece of law, with full coverage, but has been let down in the past by the lack of effective implementation. The National Environmental Plan (NUP) was launched in 1997, with a 20 to 25 year period for implementation. The NUP is currently undergoing a revision and assessment programme prior to its formal implementation, along with a comprehensive water resources management plan.

AUSTRIA PART 2: COUNTRY ANALYSIS


Freshwater Annual availability (2000) 55.0km 3 Per capita 6,699m 3 Annual withdrawal (1995) 2.2km3 Domestic (1987) 31% Industrial (1987) 60% Agriculture (1987) 9% Municipal entity People served Wasserwerke Wein 1,540,000 Nösiwag 460,000 Stadtbetriebe Linz 285,000 Grazer Stadtwerke 230,000 Salzberger Stadwerke 143,000 Innsbrucker Kommunalbetriebe 125,000 Wasserwerke Eisenstadt 119,000 Stadtwerke Klagenfurt 91,000 Wasserwerke St Pölten 49,000 Wasserwerke Bregenz 33,000

Source: EVN, analysts’ presentation 2001.

Groundwater Annual availability (2000) 22.3km3 Per capita 2,716m 3 Annual withdrawal (1989) 0.6km3 Domestic (1987) 52% Industrial (1987) 43% Agriculture (1987) 5%

Privatisation gently emerges 90% of water is directly provided from municipal utilities. A degree of agglomeration is taking place, and there are reasonable expectations of private-public partnerships evolving, rather than outright privatisation in the medium term. The government’s Water Management Fund is used for the financing of water and sewerage infrastructure, and water is seen as being cheap when compared to German water. Wasserwerke Wien has been seen bidding for water and sewerage concessions in central and eastern Europe, and Stewag, the Styrian electricity utility, is working with Suez on projects and was part of the Maribor consortium in Slovenia. MAJOR CITIES City 2000 2015 Comments Vienna 2,065,000 2,069,000 Corporatisation of Vienna Water In 2003, EVN acquired WTE from Berlinwasser (see RWE company entry). WTE specialises in services for the planning, design and construction of water and wastewater treatment plants in Germany and Central and Eastern Europe. EVN is seeking to develop WTE into a water and wastewater service provision entity. In 2003, Vienna Wasser set up the Aquaplus private sector joint venture for contracts in Austria and eastern Europe, while Energie AG has made investments in the Czech republic, acquiring some of AWG stakes there. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Lower Austria Operation of water services Nösiwag Waidhofen WWTW BOT Ariwa Private sector company operations (Please see the relevant company entry for details)


Nösiwag EVN (Austria) 467,000 0 467,000 Ariwa Aquaplus (Austria) 0 10,000 10,000 Source: OECD Environmental Performance Reviews: A ustria. OECD, Paris, 2003

BAHRAIN PART 2: COUNTRY ANALYSIS


BAHRAIN Groundwater depletion is the current concern The Gulf state of Bahrain had a population of 700,000 in 2002, 90% of whom are in urban areas. The leading cities are Manama (140,000 people) and Muharraq (74,000). According to the Ministry of Electricity and Water, there were 140,000 customer accounts in 2001. Indigenous water sources (all using artesian aquifers) generate 0.11million m3 of water per day, compared with a current water demand that peaks at 0.34million m3 per day in the summer and 0.27million m 3 per day in the winter. Currently, 82% of water is taken from groundwater sources. Although groundwater abstraction is being replaced by desalination, it will take 1400 years to recharge the country’s groundwater sources. Agriculture has already been impacted by groundwater degradation. In 2000, 40% of municipal and industrial effluents were treated, 30% of these to tertiary standard, with the recovered water contributing to 4% of water needs. Recycling of other used water resources has been developed, with 60% of these waters going to agriculture. Water usage has been rising at 6% pa since 1986.

Year Demand (mg/d) Population 1970 12.62 220,000 1980 26.70 340,000 1990 61.70 490,000 1994 66.75 560,000 1998 101.00 650,000 2005 126.00 800,000

The Government has budgeted US$400 million for water and power contracts in 2002-04, including tripling the water production capacity at Hidd to 90million gallons a day. This is part of the US$300 million phase three of the Hidd water and power project. Currently US$342 million is being spent on the second phase. In addition, US$37 million is to be spent on 3million gallons per day of new capacity at the Abu Jarjoor reverse osmosis plant. Privatisation to take place by 2004? The government has been developing a timetable for the privatisation of water and electricity by 2004. However, no recent progress has been identified. In 2003, Bahrain selected Ernst & Young to lead a group of companies to restructure the water and electricity sectors as part of its utilities privatization programme as part of a 15 year water and power plan. At the same time, an Electricity & Water Sector Privatisation Committee was set up. Currently the government provides some BD24 million (US$65 million) in subsidies for water that costs 270fils per m3 to produce and 60fils per m3 to sell. Bahrain has reduced its levels of unaccounted-for-water (UFW) from 35% in 1993 to 10% by 2002. In 1995, Bahrain had a desalination capacity of 0.18million m3 pa through three plants. Two of these plants (Sitra and Al-Dur) are due to be renovated, while Abu Jajour is to be extended to handle 0.32-0.45million m3 per day by 2005. By expanding tertiary treatment to cover all effluents, it is hoped to recover 200,000m 3 of water pa by 2010, or some 20% of the total demand.

BANGLADESH PART 2: COUNTRY ANALYSIS


BANGLADESH The current Dhaka Water Supply and Sanitation Project is both one of the most ambitious urban service provision projects in South Asia and one of the first to take into account the need to develop these resources over a period of decades, rather than via a series of short term projects and targets.

Economics (2002) GDP per capita US$351 GDP per capita (PPP) US$1,700 GDP in Agriculture 25% GDP in Industry 24% GDP in Services 51%

Management The National Water Plan, started in 1983, concentrated on flood control. Despite this approach and the country’s exposure to monsoons, the government found that it had failed to address large scale water management issues. An integrated water management policy was developed in 1995, leading to a National Water Policy and National Water Management Plan being adopted in 1997. These took into account municipal water supply and sewerage issues for the first time. Sanitation projects are typically being developed on a local basis, concentrating on installing lavatories with septic tanks that are serviced on a routine basis. Health problems are exacerbated by the sewage being flushed out into floodwaters during the monsoon period.

Population 2002 (million) 143.4 2015 (million) 181.4 Urbanisation by 2001 34% Urbanisation by 2015 39% In urban agglomerations, 2015 18%

Water provision In 1998, 87% of people in Bangladesh were within 150m of a tubewell and 97% of the population had access to safe water for drinking. Sanitation remains less developed. Sanitary latrines are available at home to 40% of people, about 20% of them using home-made pit-latrines. Some 262,000 children under the age of five die of diarrhoea-related diseases every year. Unsafe water and human excreta cause 40 out of the most common 50 diseases in the country.


Crisis Study: Arsenic in drinking water The rural tubewell project of the 1970s and 1980s ensured that 80% of Bangladesh’s rural population had access to water via 4.5million wells. This was regarded as a source of national pride until concentrations of arsenic were found in water taken from these wells in 1993. In 1997 it was found that arsenic contamination affected 46 out of 64 districts in Bangladesh. The United Nations Children's Fund says that around 25million Bangladeshis are at risk of disability or death from arsenic poisoning. Examination have been carried out on 30,000 tube wells to date, with 19% having arsenic levels above acceptable limits. The arsenic is naturally occurring and leaches into well water from clay, silt and sand in the alluvial Ganges aquifers . Concentrations of 300 to 4000µg/L have been recorded, against the drinking water standard for Bangladesh of 50µg/L and WHO guideline level of 10µg/L. It is believed that bacteria are responsible for the release of arsenic into water from the surrounding earth. Without such bacterial activity, the arsenic would remain in an insoluble form, and thus be unable to contaminate the water. This has been exacerbated by over-abstraction of groundwater and the disturbance of the Holocene sediments that contain the arsenic. Short term effects include skin problems and gangrene, along with enlarged livers. Skin cancers occur at a later stage. Arsenic affects people with low protein and low vitamin diets more severely. In response, low cost filtration techniques have been developed, designed to turn the arsenic into insoluble compounds. A typical example being developed serving 150 people from one well for 20 years costs US$0.15 per person per annum (Beard, J. New Scientist, 28 th March 1998). This still leaves the country with a legacy of ill health and the need to rebuild confidence in its water resources. While much time and money has been spent on surveys, conferences and research, practical responses have remained piecemeal. In 2000, the WHO declared the incident the greatest poisoning in history.

BANGLADESH PART 2: COUNTRY ANALYSIS


Work carried out in 2002 suggests that developing the supply of arsenic-free water to the entire population might cost from BDT5 billion to BDT30 billion (€105-632 million) depending on the option adopted. This is to be achieved through developing alternative sources of drinking water (dug-well water, surface water after treatment, deep tubewell water, rainwater harvesting) and the treatment of arsenic-contaminated water. In 2004, it was found that arsenic poisoning of groundwater is still increasing in Bangladesh, with the percentage of safe water supply coverage coming down from 98% in the late 1990s to an estimated 74% by 2004. Some 25 to 35million people are now dependent on arsenic-affected tubewells for drinking water.

Freshwater Annual availability (1998) 1,357.0km 3 Per capita 10,940m3 Annual withdrawal (1990) 11.2km3 Domestic (1987) 12% Industrial (1987) 2% Agriculture (1987) 86%

Groundwater Annual availability (1998) 34.0km 3 Per capita 274m3 Annual withdrawal (1990) 3.4km3

Domestic (1979) 13% Industrial (1979) 1% Agriculture (1979) 86%

City Study: The Dhaka Water and Sewerage Authority Dhaka needs a minimum of 1.6bn L of water a day against a theoretical capacity of 1.35bn L a day and an actual production of 1.26bn L. Electrical problems mean 40% of the city's 370 wells do not work, while 600km oaf water pipes out of 2,000km need to be replaced. Average water consumption is 119l per capita per day, costing US$0.40 per m3. In 1991, 59% of the population received piped water from 90,000 household connections and 1,200 communal taps. Dhaka's population is growing 6% a year, of which 40% end up in the slums. The 2.5million people living in slums are not connected to the water system as they are not registered as landowners. Since 2000, the government has deployed the army to stop the theft of water supplies in the capital. Under the 1998 master plan, US$500 million in investments have been identified for the period to 2013. The World Bank water treatment loan of US$80 million has run into difficulties because of currency problems, so bilateral loans are being sought. Of the city's population, 20% were connected to sewerage in 1984, rising to 44% by 1991, due to the World Bank supporting a secondary sewerage expansion project. By 2002, this had fallen to 30% due to population expansion, with 10% of effluents being treated. Dhaka's effluent treatment capacity is 120,000m3 a day, but only 50,000m3 reaches the plant because the main sewer pipe is broken. The Fourth Dhaka Water Supply and Sanitation Project includes a US$3,159 million scheme to improve Dhaka's sewerage network by 2020.

MAJOR CITIES City 2000 2015 Status Dacca 12,519,000 22,766,000 N/A Chittagong 3,651,000 6,360,000 N/A Khulna 1,442,000 2,467,000 N/A Rajshahi 1,035,000 2,003,000 N/A

Sources: International Workshop on the Arsenic Problem and Water Resource Management in Bangladesh. Conference in Dhaka, 14th - 15th December 1998. ‘Water of strife’, John Vidal, The Guardian, G2, 27/03/2002. Smith, A.H., Lingas, E.O. and Rahman, M. (2000). Contamination of drinking-water by arsenic in Bangladesh: a public health emergency. Bulletin of the World Health Organisation, 78, 9, (1093-1103).

BELGIUM PART 2: COUNTRY ANALYSIS


BELGIUM Since 1991, Aquafin has demonstrated that a semi private entity has a strong role to play in managing a systematic sewerage and sewage treatment compliance programme on a regional basis while ensuring that debt is not passed on to the government. Delays over granting contracts for constructing new sewage treatment works for Brussels mean that the EU wastewater treatment deadlines for 2005 will be missed.

Economics (2002) GDP per capita US$23749 GDP per capita (PPP) US$27,570 Agriculture 1% Industry 25% Services 74%

Regulation and legislation Water policy in Walloon is based on the 1967 law on non-navigable water resources, the 1985 decree for the protection of surface water (modified by the decrees of 1993 and 1996), and the 1990 decree for the protection and use of groundwater and drinking water. The Brussels region is covered by the 1971 law for the protection of groundwater against pollution, the 1983 law concerning water quality objectives and the 1993 regional prescription on environmental permits. Additional legislation concerning integrated permits for the release of wastewater and the taxation of wastewater were passed in 1992 and 1996 respectively. In Flanders water and sewage is integrated into a series of Five Year Environment Policy Plans (MINA). Every two years, a State of the Environment Report (MIRA) is produced. An Environment Programme is issued each year. General Water Treatment Programmes (AWP) are being designed especially for surface water. Nationally, cost recovery for sewerage is about 70%, although it is only 30% in Brussels. Since 1996, a series of levies have been developed for domestic, industrial and agricultural users.

Population Total (2002, million) 10.3 Total (2015, million) 10.5 In urban areas (2002) 97% In urban areas (2015) 98% In urban agglomerations (2015) 11%

Water quality According to a UNESCO survey published in March 2003, Belgium has the world’s worst water. The survey examined river water quality as well as drinking water. The next EU country was Germany, 56 places above Belgium. Both ground and surface waters are polluted by nitrates. The river Meuse is polluted by industrial effluents including chlorides, fluorides and phosphates, although it is an important source for drinking water abstraction. The most important aquifers used for drinking water production are to be found in Walloon. Drinking water is generally considered to be of good quality. In East Flanders, the water table has fallen by up to 100 metres because of the over-abstraction of water resources. As a result, the regional government is now charging a BF 2-5 per m3 levy for the abstraction of groundwater from private sources.

Inland water quality 1980 1990 I-Good 56% 17% II-Fair 17% 31% III-Poor 16% 15% IV-Bad 11% 37%

The quality of Belgium’s rivers appears to have deteriorated notably between 1980 and 1990. This reflects the cumulative legacy of the country’s outdated sewage treatment system and a belated acknowledgement as to the challenges the country has to face so as to comply with the UWWTD. In the Meuse Basin (73% of Walloon) water quality is generally grade II and better, except the Sambre River, half of which is grade III/IV. The Yser Basin (Flanders) is mainly grade III/IV. The Escaut Basin (the entire Brussels Region, the majority of Flanders and 22% of Walloon) are all grade III/IV except for the River Dyle in Walloon which is grade II. In consequence, Belgium has the highest concentration of Class IV inland waters in the EU.

Urban Services % Water 98% % Sewerage 71% % Sewage treated 45%



Developing the sewerage network There were 292 sewage treatment works in 1988, of which 13 serve cities with a population in excess of 100,000. Some 4% of the population of Belgium had their sewage treated in 1970. This rose to 23% by 1980. It is estimated that as of the end of 1998, 40-45% of Belgium’s sewage was subject to some degree of treatment. As noted in the company entry for Aquafin (sewerage and sewage services for Flanders), the limited extent of the sewerage network is currently constraining the effectiveness of the sewage treatment infrastructure. Development of sewage treatment

Sewerage and sewage treatment 1995 1998 1999 Tertiary N/A 16.1% 16.2% Secondary 28.9% 22.0% 22.5% Primary N/A 0.0% 0.0% Sewerage only 52.2% 44.4% N/A Not connected 18.6% 17.3% N/A

Sewerage and sewage treatment in 1994 Sewerage Treatment Walloon 60% 21% Flanders 82% 35%

Sewerage and sewage treatment in 2001 Sewerage Treatment Walloon 60% 46% Flanders 85% 52%

Walloon’s installed water treatment capacity amounts to 1.8million for a population of 3.2million inhabitants. For Flanders, the treatment capacity at the end of 1998 was for 5.3million people, although in practical terms, 2.87million of the region’s 5.8million people (54%) were served. This figure is expected to be raised to at least 60% by 2000.

Service coverage plans for 2005 Water Sewerage Walloon 98% 80% Flanders 98% 98%

The costs of compliance

Regional water budgets 2000 (€million) Region Area Period Cost Brussels Water opex & capex 10 years 618 Flanders Drinking water Annual 620 Flanders Sewerage Annual 248 Walloon Wastewater 2000-04 790

Charges in the Brussels region cover 30% of costs against 70% in Flanders and Wallonia. According to the government, the main challenge faced by the Flanders Region is maintaining its investment plans in the face of planning delays. The Walloon Region is facing difficulties in reaching its targets set for 2005. In the Brussels region, the stormwater and domestic sewerage systems need to be separated. The cost implications are driving the need for private sector involvement for the city’s third sewage treatment plant.

Freshwater Total (1998, km 3) 8.4 Per capita (1998, m3) 822 Withdrawals (1980, km3) 9.0 For domestic use (1987) 11% For industry (1987) 85% For agriculture (1987) 4%

Private sector participation With the exception of Aquafin and some local water provision contracts, the sector remains in public hands. The distributors are usually responsible for the production of the water, although they sometimes also produce for other regions or buy the water from regional producers. Water distribution and sewerage are organised in regional groupings. In Flanders, water is operated through the VMW, 8 intermunicipal consortiums and 22 municipal or urban organisations. Sewerage is run by Aquafin. In the Brussels Region, water is operated through Compagnie Intercommunale Bruxelloise des Eaux (CIBE). In the Walloon Region, water management is



organised through the SWDE, 22 intermunicipal consortiums, 16 private concessionaires (Régies) and 110 municipal organisations.

Groundwater Total recharge (1998, km3) 0.9 Per capita (1998, m3) 84 Withdrawals (1980, km3) 1.0 For domestic use (1980) 68% For industry (1980) 27% For agriculture (1980) 5%

Privatising sewage treatment in Brussels In Brussels, the private sector operation of new sewage treatment works is currently being developed by corporatising each new facility before putting the operation out to tender. The O&M contract for the first facility in Brussels was in fact won by the municipal water company and thus remains in the public sector. Planning and construction of the Brussels South sewage treatment works started in 1992 and entered service in 2000, serving a PE of 360,000 and costing £125 million. It is to be operated by Brussels’ CIBE. The BOT for the Brussels North sewage treatment works was bid for by VE, Suez, Bouygues and BSUB (Seeghers, Besix, UU and Bechtel) and was awarded to VE. The facility will cost €290 million and construction started in 2002, with completion officially due by 2006. Revenues of €49.6 million pa will be generated over the BOT’s 20 year life.

MAJOR CITIES Population 2000 2015 Status Brussels 1,135,000 1,135,000 Brussels North STW privatised

Private Sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Brussels North Sewage treatment BOT Aquiris West Flanders Water management for IWOV Aquinter Flemish Brabant Water management for IWVB Aquinter Flanders Sewerage and sewage treatment for VMW Aquafin

Private sector company operations (Please see the relevant company entry for details) Population served Company Parent company (country)

Water Sewerage Total Aquinter Tractabel (Suez, France) 300,000 0 300,000 Aquiris VE (France) 0 1,100,000 1,100,000 Aquafin Severn Trent (UK) 0 3,050,000 3,050,000

BELIZE PART 2: COUNTRY ANALYSIS


BELIZE The state held Water and Sewage Authority (WASA) was privatised in 2001. 10% of the shares in Belize Water Services Ltd (BWS) WASA’s successor company were acquired by the Belize Social Security Board, 7.3% by the public and the remaining 83% was acquired by Cascal. BWS is responsible for urban and adjacent areas in Belize, accounting for in excess of 50% of the country's population. Belize had a population of 236,000 in 2002, 48% living in urban areas. The Water Law of 1970 gave WASA the right to manage all water services in Belize. In 1995, WASA handed over its involvement in rural areas to the ministry of rural development. BWS remains actively involved in these areas in a support capacity. Three of the nine urban districts have sewerage (Belize City, Belmopan and San Pedro). Water in the island of San Pedro is provided through a desalination system provided by Consolidated Water. The San Pedro rate is subsidised by the government. In San Pedro, water costs BZ$0.20 per gallon for the first 1,000gallons per month. In Belize City the fee is BZ$0.10. There is typically a 20% higher cost for regions where sewerage services are provided. Outside these areas, the typical rate is BZ$0.075. Distribution losses have been cut from 50% by WASA in 1999 to 43% in 2000 with the long term aim of achieving 10-15%. Metering and billing is carried out on a monthly rate nation-wide. Potable water is formally provided to 90% of the country, including all urban dwellers. 59% of the urban population had access to sanitation in 1994.

Private Sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Belize Urban water & sewage services, privatisation Cascal San Pedro Water provision Consolidated Water



Cascal Biwater (UK)/Nuon (Netherlands) 125,000 70,000 125,000 Consolidated Consolidated Water (USA) 7,000 0 7,000

BOLIVIA PART 2: COUNTRY ANALYSIS


BOLIVIA Bolivia’s international relations, whether dealing with privatisation contracts or water rights relating to a military defeat more than 120 years ago, are somewhat volatile. These highlight how important "emotions" can be when dealing with water issues. As Suez has demonstrated, pro-active approaches can defuse such concerns.

Economics (2002) GDP per capita US$886 GDP per capita (PPP) US$2,460 GDP in agriculture 18% GDP in industry 18% GDP in services 64%

Water and sewerage services In 1988, 89% of the urban population had access to piped water, with 32% having indoor taps. 70% had access to sanitation, including 42% with flush lavatories. Water provision on the city level was fairly consistent in 1998, but there were appreciable differences in sanitation and sewerage coverage.

Piped water Indoors La Paz 97% 44% Santa Cruz 83% 25% Cochabamba 82% 59% Oruro 96% 25%

Sanitation Flush La Paz 68% 65% Santa Cruz 95% 20% Cochabamba 81% 61% Oruro 45% 37%

In December 2002, Bolivia launched a five-year, US$496 million drinking water and sanitation project, aiming to extend drinking water to some 2.1million people (US$154 million) and sewer infrastructure to about 2.3million people (US$265 million), plus US$77 million in capacity building and technical assistance. Aguas de Illimani will invest US$30 million in the plan.


Business interests cause Cochabamba to be abandoned A 40 year concession for water and sewerage services for Cochabamba was awarded to the only bidder, International Water (IWL) in December 1999. The city has a population of 516,000, which is projected to rise by 2million by 2037. In 1998, Semapa, the city’s water utility supplied 57% of the city with water and sewerage services. Water and sewerage reaches 57% of the city’s population, with water rationing taking place. The aim is to have 95% water service coverage for the city through US$270 million in capital spending. IWL’s consortium, Aguas del Turani, aimed to improve water supplies by developing a tunnel to divert water from a new source. In April 2000, there was a week of rioting that left one dead and 175 injured after violent protests against the privatisation. IWL withdrew from the project as a result. In January 2000 Aguas del Tunari increased prices by 20% as stipulated by the government. Part of this increase was imposed by the government to recoup previous project costs. Rumours were circulated about ‘real’ price increases of 35-200%. It has been alleged that the protests were co-ordinated by "people and organisations having an interest in the parallel water market" operated by water vendors. Both IWL and the government claimed the protests were financed by the cocaine drugs Mafia. IWL is suing the government. In December 2003, the International Centre for the Settlement of Investment Disputes agreed to arbitrate the dispute. It is understood that Bechtel is seeking US$50 million, US$25 million for its lost investment and the US$25 million concession fee. Since 2000, investment in water infrastructure has been frozen, due to the refusal of the protestors to allow charges for water. Urban data

Served by piped water 87% Access to sewerage 72%

BOLIVIA PART 2: COUNTRY ANALYSIS


Law 2066 passed in 2000 after the Cochabamba crisis restricts the scope of the private sector to operate in Bolivia's water and wastewater sector. The law has yet to be implemented and in 2003 the government has sought to encourage a degree of private sector participation through Plan Bolivia, which also aims to delegate management authority to water entities to encourage more investment and operational efficiency. This has been suspended due to further protests and a degree of antagonism towards foreign companies. In 2004, 24 of Bolivia's 165 water operators in 117 municipalities operate as concessions, albeit usually for the smaller entities. Low cost approaches in La Paz In 1997 a 30 year water and sewerage concession for La Paz and El Alto, serving 1.34million people was awarded to Aguas de Illimani. The consortium is led by Suez (53%), along with local and Argentinean investors. Over 95% of La Paz and 80% of El Alto are connected to the mains and reached 100% by 2002. Distribution losses are 24% and are to be reduced. While at least 65% of La Paz is connected to sewerage the connection rate is only 25% in El Alto. The sewerage connection rate is to rise to 95% by the end of the concession. La Paz is to have 70,000 new water and 38,000 new sewerage connections via US$68 million in loans to Aguas de Illimani by the IADB. Suez’s contract in La Paz was specifically designed to pre-empt affordability concerns. Connections in El Alto have increased from 72,000 to 107,000 by the start of 2000 and are expected to be nearly 100% by the end of 2000. By using labour provided by customers, the cost of connecting poor areas has been reduced. For water the average cost was US$41-47 per connection against US$133-159 for a conventional connection, with US$58-68 against US$194-200 for sewerage. Connection costs are repaid by the community over five years via an interest free loan, allied with micro credit for internal plumbing. Community involvement (e.g. choice in siting pipes) was paramount, along with gaining community support from the outset. Similar projects will only take place where at least 60% of the community supports them.

Freshwater Annual availability (1998) 300.0km 3 Per capita 38,625m 3 Annual withdrawal (date) 1.4km3 Domestic 22% Industrial 20% Agriculture 48%

MAJOR CITIES City 2000 2015 Comments La Paz 1,460,000 2,098,000 Water and sewerage privatised Santa Cruz 1,062,000 1,676,000 N/A

Another area of dispute In April 2000, Bolivia’s Ductec paid US$46 million for the concession to distribute water from the Silala River/Springs. The company has been seeking to charge Chilean companies for using the water downstream where it flows into Chile. The Chilean companies claim that this water is from Chile and refuse to pay the US$4 million pa that Ductec seeks. Ductec is threatening to build a dam which would divert the water away from Chile unless it is paid. In 2004, Chile’s president Ricardo Lagos said that if technical and geological studies prove that the source is in Bolivia and thus not an international water, Chile would be willing to negotiate rates . In essence, this is a reverberation of the 1879 War of the Pacific, when Bolivia lost its Pacific seaboard to Chile. Water as ever, is thus used as a tool in international diplomacy. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Silala Springs Water rights and provision concession Ductec La Paz and El Alto Water and sewerage concession Aguas de Illimati Private sector company operations (Please see the relevant company entry for details )


Ductec Ductec (Chile) NA 0 NA A de Illimani Suez (France) 1,400,000 850,000 1,400,000 Source: Dalton G. (2001) ‘Private sector finance for water sector infrastructure: what does Cochabamba tell us about using this instrument?’ Water Issues Study Group, School of Oriental and African Studies (SOAS), University of London (Occasional Paper No 37, 2001).

BRAZIL PART 2: COUNTRY ANALYSIS


BRAZIL The continued problems of water provision and pollution in m ost of Brazil’s cities and the progress being made by Sao Paulo’s SABESP since it was partially floated have ensured that the flotation process that was stalled in 1998 will be resumed sooner rather than later. However, during 2000, only one of the five state concerns earmarked for sale was actually privatised. Political and legal delays remain an imponderable factor. The next privatisation is likely to be Bahia’s EMBASA.


Regulation and legislation According to the Ministry of Cities in 2003, Brazil needs to invest around US$62 billion in sanitation and water supply programs by 2020 to meet urban service needs. 45m illion Brazilians who live in urban and rural areas do not have access to water supplies. More Brazilians had telephone lines, refrigerators and television sets in 2002 than access to a proper sewage system, a government study showed. In 2000 the Brazilian Government passed a law to establish the Agência Nacional de Águas (ANA), a new federal regulatory agency responsible for the implementation of the National Water Resources Policy and for co-ordinating the National System of Water Resources Management. The agency will have financial and administrative autonomy, and will be linked to the Ministry of the Environment. In Brazil, there are 27 state water and sewage companies serving 89million people (72% of the urban population) in 3,823 municipalities (69% of the total). Each of the 26 states and the Federal District manage water under state jurisdiction. At the river basin level, 43 Basin Committees have been established to date, 39 of these at state level and 4 in basins of rivers under Federal jurisdiction. Around 50% are found in the south east. The Water Law of 1977 established the principle of decentralised and participatory management, with the discussion on the best management practices with local users. A law on pricing provisions has been adopted in 14 states and in the Federal District, with the aim of full cost recovery through billing. One of the main strategies of the National Sanitation Policy is to improve the level of efficiency of service providers and co-ordination of public and private efforts in order to optimise the upgrading and expansion of service cost without incurring excessive costs. In March 2004, Brazil’s lower house approved a bill aimed at promoting public-private partnerships in water and wastewater. If fully enacted, the bill will require projects to have an environmental license and guarantees on the part of the private sector in the form of bid and performance bonds. The Sao Paulo state government is understood to be planning to create a state controlled company, Companhia Paulista de Parcerias, which would manage public-private partnership projects. In June 2004, a law (10.881/2004) was passed regulating contracts for river water use between companies and municipal water works and the National Water Agency (ANA). Water basin committees will receive authority to set up water companies or choose a company to manage the water in their area. This will encourage water basin regions to start charging for river water.


Infrastructure development The table below outlines the regional development of water, sewerage and sewage treatment in Brazil in 1991. The column for treated sewage refers to the percentage of sewage collected that is subject to treatment.

% Water Sewerage Treated North 82% 4% 24% N East 87% 16% 72% S East 93% 57% 32% South 96% 18% 33% West 87% 35% 40% Total 91% 35% 38%



The National Sanitation Policy seeks to develop universal access to water and sewerage services in urban areas, with at least 80% of effluents subject to treatment by the year 2010. In 1995, 15.6% of urban sewage effluents were treated. Water supply

1970 1980 1997 Urban 61% 79% 91% Rural 3% 5% 20%

Sewerage

1970 1980 1995 Urban – network 22% 37% 48% Urban – septic tanks 25% 23% 23% Rural – network 1% 2% 3% Rural – septic tanks 3% 7% 11%

In 1995, 92.8% of water produced and distributed through the domestic supply network was treated. Studies in 2000 by the Ministry of Health and BNDS, the state development bank, found that 18,250 people die each year as a result of inadequate basic sanitation, with 65% of all infant admissions to hospital as a result of infections related to solid or liquid waste. According to the Ministry of Cities in 2003, Brazil needs to invest around US$62 billion in sanitation and water supply programs by 2020 to meet urban service needs. 45million Brazilians who live in urban and rural areas do not have access to water supplies. More Brazilians had telephone lines, refrigerators and television sets in 2002 than access to a proper sewage system, a government study showed. Urban Data

Served by piped water 67% Access to sewerage 32% With sewage treatment 10%

Market structure and the private sector Water and sewerage services to urban areas are provided through two contract types. They can either be granted through concessions to state sewerage companies for 25 to 50 years or by direct management through autonomous departments. In some cases, the latter is provided with assistance from the Ministry of Health via the National Health Foundation.

Water Sewerage Total 7,327 1,544 Concessions 4,753 686 Direct mgt 2,024 583 Assisted by MFH 625 185

There are 27 concession companies (County Water and Sewerage Service companies), all of whom serve more than 100,000 people and supply water to 78% of the urban population and sewerage services to 64%. Contracting out to the private sector as opposed to commercialisation and the partial flotation of municipal concession holders remains at an early stage. In total, there are some 1,350 water and sewerage entities in Brazil, of which 32 have been privatised to date.

Freshwater Annual availability (1998) 5,190.0km 3 Per capita 31,424m 3 Annual withdrawal (1990) 54.9km 3 Domestic (1987) 21% Industrial (1987) 18% Agriculture (1987) 61%

Financing service extension The estimated cost for investments necessary to develop an urban water supply, sewerage and sewage treatment service network is R$50 billion (US$20 billion) by 2017. Brazil will invest BRL1.742 billion (US$613 million) in water and sewerage services in 2004, extending services to 7.6million people in 332 municipalities.



US$billion Water Sewage Total Invested, 1970-98 11.0 6.0 17.0 Needed, 1999-10 5.6 25.4 31.0

Currently, the private sector has a limited role in financing various nationally organised water and sewerage projects. This is expected to change as and when the current round of mooted privatisations gets underway. Plans in three states show how these may evolve: Espirito Santo state has drawn up a US$62 million water and sewerage programme, of which US$ 30m of which will come from the World Bank. The state water utility, Cesan aims to connect 350,000 residents to the sewerage network, increasing coverage from 21% to 60%, with the expansion of the treated water supply system reaching 1.2million residents. Copasa, the Minas Gerais state water utility has awarded eight consultancy contracts for the water and sewerage sector, as part of a BRL2.3bn ($782m) investment plan, up to 2006, to provide universal statewide sanitation coverage. Copasa serves some 10million of Minas Gerais’ 16.5million residents with drinking water and 4.5million with sewage services. Copasa aims to use a series of small scale private water and WWTW projects from 2005 in line with its aim of 100% water coverage and 95% sewerage coverage by 2006, along with improving sewage treatment and billing rates. Brazil’s Rio Grande do Norte state has passed a law to govern the state’s water and sanitation policy on the basis that water and sewage services should be universal, regular, reliable and efficient. The government aims to use the law to increase drinking water coverage to 100% of the population and sewerage to 40% by 2009. Sewerage coverage will be increased to 70% by 2014 and to 100% by 2019. The law also states that water and sewage policy must be revised every four years. The law also calls for the creation of a state waterworks fund (Funesan), to obtain the necessary financing for the expansion work. Finally the law prohibits any operation that interferes with the state`s control of Caern.

Groundwater Annual availability (1998) 1,874.0km 3 Per capita 11,347m 3

Private sector players As well as the major players, companies from the USA, Japan and Germany have been noted as being involved in smaller projects. VE is active in the waste management sector, and in 1999 RWE formed a JV with Electricidade de Portugal to seek contracts in the country. AWG is involved in a deep well sewage treatment project. In 1999, Suez announced that it seeks to invest US$800 million in Brazil from 1999 to 2003, aiming for 10-15million people or 15% of what it regards as the country’s addressable market. After the planned sell off of Rio’s Cedae in 1998, there was a lull in market activity. Cosama, serving the City of Manaus in Amazonas was sold to Suez in 2000. A full privatisation of Sabesp (88% held by Sao Paulo at present) is under development, with 16-22% of the shares to be offered to the public in Brazil and on the NYSE in 2002. Potential plays are listed below:

Company State Population served Water connections CEDAE Rio de Janeiro 9,700,000 1,500,000 CESAN Esprito Santo 1,700,000 353,000 COMPESE Pernembuco 5,100,000 1,000,000 EMBASA Bahia 6,800,000 1,600,000 Municipal Campo Grande Mato Grosso do Sul 607,299 146,112 Cuiaba Mato Grosso 539,692 105,883 Itu Sao Paulo 34,404 112,000 Novo Hamburgo Rio Grande do Sul 44,210 192,274 Vareza Grande Mato Grosso 36,217 192,979

The World Bank’s IFC is currently examining COMPESE to see if its sewerage services in the city of Petrolina could be privatised. Aguas de Petrolina has 100% water coverage, 80-85% sewerage coverage and 55% of effluents are treated. As Aguas de Petrolina is profitable, the PSP process needs to ensure that it can continue to support water and sewerage services in the rest of the State. Earth Tech's Brazilian subsidiary Multiserve gained a 25 year DBO contract for water supply and sewerage to Nova Friburgo in Rio de Janeiro. 170,000 people are served, with 10% metered. Universal water metering is planned by 2005. Water and sewerage for the resort of Dos Lagos was privatised with a 25 year concession being awarded in 1998. The resort holds 600,000 people in the holiday season. Hochtief, Preussag and RWE’s RRE of Germany were originally involved, but withdrew from the consortium in April 1999. ProLagos (PEM Enghenaria and Monteiro Aranha Participacoes of Brazil) will now hold the concession, with a capex of US$181 million.



MAJOR CITIES City 2000 2015 Status Sao Paulo 17,962,000 21,229,000 SAPESP partially floated Rio de Janeiro 10,652,000 11,543,000 CEDAE flotation postponed Belo Horizonte 4,224,000 5,395,000 N/A Porto Alegre 3,757,000 4,838,000 N/A Recife 3,346,000 3,986,000 N/A Salvador 3,328,000 4,436,000 EMBASA privatisation under way Fortazela 3,066,000 4,338,000 N/A Curitiba 2,562,000 3,457,000 N/A Brasilia 2,016,000 2,667,000 N/A Belem 1,658,000 2,158,000 N/A Campinas 1,895,000 2,752,000 N/A Manaus 1,467,000 2,328,000 Manuas Saneamento sold to Suez in 2000 Santos 1,270,000 1,506,000 N/A Goiânia 1,117,000 1,409,000 N/A Sao Jose de Campos 972,000 1,560,000 N/A Sao Luis 968,000 1,459,000 N/A Campo Grande 821,000 1,437,000 N/A Maceió 886,000 1,359,000 N/A Teresina 848,000 1,310,000 N/A Natal 806,000 1,147,000 N/A

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Dos Lagos 25 year water and sewerage concession ProLagos Nova Friburgo 25 year concession, water and sewerage Multiservice-engenharia Jau 25 year DBFO, wastewater Multiservice-engenharia Sabesp Sale of 10% of Sao Paulo’s stake in 1994 Sao Paulo Sanepar Sale of 30% of Sanepar by Parana Parana State Manuas Water & sewerage concession Suez Brusque Deep shaft STW BOT Cejen Anglian Campo Grande Water and sewerage concession Interagua

Privatisation study: Aguas de Limeira Suez’s Aguas de Limeira was set up in June 1995 as a 30 year concession. This was the first water privatisation in Brazil, serving 250,000 people. Progress over the first five years has been material:

1995 2000 Water and wastewater 80% 100% Losses 45% 24% 1 year + non payment 20% <1% Connections/ staff 250 730 Staff satisfaction 39% 68% Water shortage complaints 6300 <10 (pcm)

ADL has a turnover of US$10 million. At the outset, there were problems due to the election of an anti-privatisation Mayor in 1997, but the political climate has moved since 2000. The aim at the outset was for US$45 million of investment by 2000, but politics meant only US$9 million was spent. US$16 million will be spent in 2001-02 and US$22 million in 2003-04, with a further US$35 million in 2005-10. After five years, 97% of the population is satisfied with ADL’s service, 80% rating it as good to very good.


Water Sewerage Total SABESP San Paolo municipality 19,900,000 15,500,000 19,900,000 Aguas de Limeira Suez (France) 256,000 256,000 217,000 Sanepar VE (France) 7,300,000 2,750,000 7,300,000 Manuas Saneamento Suez (France) 1,400,000 1,200,000 1,400,000 Cejen-Anglian AWG (UK) 0 200,000 200,000 ProLagos Aguas de Portugal (Portugal) 600,000 600,000 600,000 Multiservice-engenharia Earth Tech/Tyco (USA) 180,000 300,000 300,000 Interagua Agbar (Spain) 650,000 650,000 650,000

Source: Perona, V. (2000). Case study: the Brazilian water and sewerage sector. Presentation to IBC, Financing of Water & Sewerage Projects, IMB, London.

BULGARIA PART 2: COUNTRY ANALYSIS


BULGARIA The privatisation of Sofia’s water services was not without controversy, but has been a useful lesson. The exclusion of Azurix on the grounds that the company did not have enough experience proved to be expedient while UU has inherited an infrastructure in an appreciably poorer state than anticipated. UU has in turn demonstrated that a difficult market can be made to work.

Economics (2002) GDP per capita US$1,944 GDP per capita (PPP) US$7,130 Agriculture 15% Industry 23% Services 62%

Legislation and management The Ministry of Environment and Waters is responsible for co-ordinating water resource management and development. Co-ordinating bodies are being developed at the river basin level. The Law on Waters was passed in 1998. The National Program for Municipal Wastewater Treatment addressed some local shortfalls in sewage treatment between 1994 and 1997. Integrated water resource managem ent is currently being developed through the strategy for unified management of waters and the strategy for development of the use of water resources and water preservation. Under these plans, the government is to develop and implement a permit system for effluent discharges using a phased approach with interim limits and enforceable compliance schedules. In addition, the cost recovery of services is to be improved through focusing on water metering and collection practices, along with the implementation of a water effluent charge. The funding of the completion of unfinished sewage treatment plants is being given priority in areas where maximum benefits will occur, especially in tourist areas.


Inland water quality 1993 Ia-II Very Good/Fair 35% III-IV Poor/Bad 65%

The period after 1989 has seen a significant reduction of discharges into surface water and ground water bodies, resulting in an improvement in their quality. The OECD has also noted a gradual improvement in river water quality between 1990 and 1994. This improvement is probably due more to the restrictions imposed on industrial effluent discharges and the closing down of certain industrial enterprises, than due to industrial water treatment projects. The government believes that 100% of the country’s groundwater is contaminated with nitrates and in the most intensive farming areas the level exceeds by at least a factor of two the limit of 50mg/l. In regions with mining and heavy engineering industries, the drinking water also contains metals and arsenic. Approximately 55% of the population in these regions (482,983 people), periodically receive sub-standard water. Of these people, 99.4% drink water with high iron, manganese and zinc levels, while 0.6% drink water with excessively high lead and arsenic levels. Bacterial contamination has increased in recent years, exceeding EU and WHO standards in 5% of all samples.

Urban services % Water 95% % Sewerage 71% % Sewage treated 40%

Infrastructure development 98% of the population (in 238 towns and 4,278 villages) are covered by the mains water supply. 95% of drinking water supplied comes from localised sources serving one hundred to several thousand consumers. 66% of the population was connected to the sewerage network in 1996, with a medium term plan to increase this to 90%. In 1996, the capacity of sewage treatment works was 723,554million m³. Approximately 5% of sewage effluents subject to treatment were recycled and 39.8% of urban sewerage waters were treated. It is understood that most of the sewage treatment capacity is to the primary standard, while no tertiary treatment facilities are currently in operation. Many of the new municipal wastewater treatment plants are currently incomplete because



of the problems in obtaining suitable funding. The government believes that it will take some decades to address the country’s water infrastructure shortfalls. The government has identified the construction of a series of tertiary treatment facilities as one of its main current priorities. Water and sewerage infrastructure spending, governmental allocations (Leva million) (1,000 Leva = US$1):

1996 1997 Major water projects 340 4,000 Small water projects 800 2,000 Sewage treatment projects 406 1,656 Number of STW projects 30 27

The government’s current estimated costs for the achieving of universal water supply and sanitation coverage are rather broad in scope.

Leva per m3 Water supply 70 - 850 Sewerage network 5 - 75 Sewage treatment 20 - 505

Development of sewage treatment

Sewerage and sewage treatment 1993 1998 Tertiary 0.0% 0.8% Secondary 34.4% 35.0% Primary 0.7% 0.9% Sewerage only 31.4% 30.0% Not connected 33.5% 33.3%

Bulgaria plans to join the EU in 2007 and needs BGL6.8 billion (€3.6 billion) to modernize its water supply and sewerage systems to comply with European Union standards, according to the Ministry for Regional Development and Public Works in 2003. BGL3.37 billion (€1.77 billion) is needed for the rehabilitation of the water supply network and reduction of water losses. The Ministry plans to construct sewerage systems in cities of more than 30,000 people and to build wastewater treatment plants for BGL3.4 billion (€1.8 billion). The government hopes to raise at least 40% of the required funds through private investment in the form of concessions, operation and management contracts, and JVs. The remainder would come from grants and loans from the EU ISPA programme and the European Investment Bank (EIB). Implementation of the improvements will be the task of an executive agency for water supply and sewerage to be established by the Ministry for Regional Development and Public Works.

Freshwater Total (1998, km 3) 18.0 Per capita (1998, m3) 2,146 Withdrawals (1988, km3) 13.9 For domestic use (1987) 3% For industry (1987) 76% For agriculture (1987) 22%

Privatisation and investment The EBRD is carrying out a number of projects concerned with its Danube River Basin plan (DDEMP - Danube Delta Environmental Management Programme) for the Sofia Municipality and a number of other towns for developing initiatives for the financing of non-sovereign projects for water provision and effluent treatment. Currently the main objective is to develop methods of financing investment into infrastructure. In 1995, the World Bank made a loan of US$57 million to be added to a Bulgarian Government facility worth £21 million for municipal water and sewerage projects. These loans will be allocated to projects that are operated on at least a quasi-private basis, with the principle that the water bills will be raised so as to make each operation profitable. Otherwise there has been minimal foreign investment in Bulgaria to date, while the pace of privatisation has been notably slow. The EU’s ISPA has provided grants worth €238 million for 16 projects with a total value of €330 million. Structural funding worth €2,300 million will be made available between 2007 and 2009 as part of the EU Accession process. Between 1997 and 1998, the state controlled water companies were restructured into corporatised entities with 49% of their equity transferred from the state to the municipalities.



Groundwater Total recharge (1998, km3) 13.4 Per capita (1998, m3) 1,598 Withdrawals (1988, km3) 5.0

Two 25 year concessions covering 0.67million people in northern Bulgaria may be awarded in 2004, having originally been set to be privatised in 2002. Five companies have pre-qualified: Suez, VE, Cascal (Biwater/Nuon), UU, VE and RWE (Thames). The Varna (470,000 people) and Shumen (200,000 people) concessions involve capex of US$74 million and US$51 million respectively.

MAJOR CITIES Population 2000 2015 Status Sofia 1,187,000 1,187,000 Water & sewerage services privatised

Privatisation of Sofia’s water services ViK (Vodosnabdjavane I Kalanizatsia) was founded in 1884 and is responsible for Sofia’s water and sewerage services. 51% of ViK’s equity was sold to International Water and United Utilities in 2000, after a privatisation programme was developed with the EBRD in 1996. The contract involves US$152 million of investment for the first 15 years of the concession’s 25 year life, US$60 million having been spent by 2003. Water shortages in Sofia led to rationing in 1995. The city’s 1,700km sewerage system is in a poor condition, and mainly offering primary treatment, where it is connected to sewage treatment works. Distribution losses in Sofia fell from 64% in 1996 to 52% in 1997, with the aim of 30% losses by 2004. The proportion of bills collected has increased from 75% to 90%. Improved billing and price rises mean that turnover is set to rise from US$30 million in 2002 to US$40 million in 2004. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Sofia 25 year water and sewerage concession UUI Private sector company operations (Please see the relevant company entry for details)


UUI United Utilities (UK) 1,200,000 1,200,000 1,200,000

CAMEROON PART 2: COUNTRY ANALYSIS


CAMEROON The urban water provision and sewerage systems in Cameroon have fallen into disrepair. The concession award to Suez is an example of a private sector company being invited to address a country’s water problems within a single contract.


Water provision Currently 30% of the total population is served with piped water. Water deliveries for domestic usage are running at 200million m3 per annum, with the aim of increasing this to 300million m3 per annum by 2010 and 400million m3 per annum by 2020. In 2001, Water Resource Minister Yves Mbelle Ndoe said that 50% of the rural population and 40% of the urban population still lack potable water.


Services in Yaounde In 1993, 85% of the population of Yaounde had access to potable water, along with 3% having sewerage. A similar level of service is found in Douala, the second city. In 1999, water was rationed in Yaounde because of problems at a treatment plant. Yaounde has been divided into three sectors; each receiving water only three times a week due to a leaking pipeline at a WTW 50km south of Yaounde, which SNEC does not have the capacity to repair. In 2004, there were 500 cases of cholera and 13 fatalities in Douala due to people drinking from unprotected wells.

Urban data Served by piped water 78% Access to sewerage 64%

Freshwater Annual availability (1998) 268.0km 3 Per capita 18,737m 3 Annual withdrawal (1990) 0.4km3 Domestic 46% Industrial 19% Agriculture 35%

Privatisation of SNEC…for a while Suez was awarded the 20 year water supply concession for Société National des Eaux de Cameroon (SNEC) in May 2000. This involves €300 million capex on network rehabilitation and extension and the fitting of water meters. SNEC had a €24 million turnover in 1998 and supplies water to over 100 towns and cities including Douala & Yaounde. Implementing privatisation has been slow. As a result, the government is planning to decentralise the daily management of water from SNEC to local governments. In 2004, Suez announced that this concessions was being revoked.

MAJOR CITIES City 2000 2015 Comments Douala 1,642,000 2,607,000 SNEC privatised 2000-04 Yaounde 1,420,000 2,281,000 SNEC privatised 2000-04

CAMEROON PART 2: COUNTRY ANALYSIS


Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Urban areas Water distribution concession SNEC Private sector company operations (Please see the relevant company entry for details)


SNEC Suez (France) 5,300,000 0 5,300,000

CANADA PART 2: COUNTRY ANALYSIS


CANADA Private sector participation is developing in a low key manner, typically through the accretion of a number of small contracts. To some extent, contracts are being awarded along linguistic lines, with all the French companies actively developing their presence in the country. To date, no sewerage contracts have been awarded, which may be of interest in the medium term, given recent criticism of the state of the country’s sewage treatment infrastructure.


Regulation Canada has 9% of the world's renewable water resources and 20% of the world’s freshwater when its glaciers are included, while accounting for 0.5% of the world’s population. 60% of Canada's freshwater drains North, while 90% of the Canadian population lives in the South, where pollution and escalating demand are increasing pressure on freshwater resources. The Federal Water Policy (1987) encourages full-cost pricing of all water use. The territorial or municipal governments set water fees for water use in communities. Provincial legislation such as the 1996 Alberta Water Act promotes water conservation, strengthens licensing and restricts interbasin diversion. Other federal legislation includes the Canada Water Act (1970), the International River Improvements Act (1955), the Canadian Environmental Assessment Act (1996), the International Boundary Waters Treaty Act (1911), the Canadian Environmental Protection Act (1988) and the Navigable Waters Protection Act (1993).


Sewerage service penetration reached 75% in 1994, with 93% of the effluents collected by the sewerage network receiving treatment, compared with 85% in 1991. Development of sewage treatment, 1981-1996

1981 1986 1991 1996 None N/A N/A N/A N/A Primary 25.0% 27.0% 32.0% 33.0% Secondary 25.0% 23.0% 25.0% 24.0% Tertiary 14.0% 13.0% 18.0% 18.0%

The target is to provide 100% of the population with potable water and with 100% sanitation coverage. In 1998, 90% of the population had access to potable drinking water, with 85% served by sewerage and some 80% of collected sewage effluents treated to at least the secondary level. Before usage approximately 81.5% of drinking water receives some form of treatment. For the municipal sector, providing a complete water supply services plus secondary waste treatment in all municipalities is estimated to cost from CAN$50 to CAN$75 billion. This includes the cost of upgrading, renovation, expansion, and associated operating costs. The estimated value for the municipal water utility systems is about CAN$110 billion. In May 2001, the Federation of Canadian Municipalities es timated that over CAN$16.5 billion will be needed to upgrade the water infrastructure over the next 10 years. The Canadian Water and Wastewater Association has estimated CAN$90 billion will be needed for water and wastewater infrastructure over the next 15 years. The cost of upgrading water and wastewater systems in the Niagara region was estimated CAN$590 million, with a further CAN$193 million in work needed to the water systems in the area municipalities. Water rates are projected to rise by 10% pa unti l 2009 before settling down to 3% by 2012, increasing the rate from CAN$0.40 per m3 to CAN$0.71 per m3. Sewer rates will have an annual 3% increase over the same time frame, rising from CAN$0.54 per m 3 in 2004 to CAN$0.68 per m3 in 2012. In 2003, it was found that water leakage in Montreal was 37% against the national average of water system losses of 13%. According to PriceWaterhouseCooper, updating the system will cost the city CAN$4 billion over 20 years.



Urban Data Served by piped water 99% Litres per capita per day 331 Access to sewerage 98% With sewage treatment 82%

Water usage Between 1991 and 1994, daily municipal water use fell by 3.3% in per-capita terms and fell overall despite a 2% increase in municipal population receiving water services, over the same period. This decrease is a result of declines in commercial and industrial uses; probably because of the recession and a reduction in economic activity. Municipal water use, by sector (1994)

Domestic 52% Industrial 17% Commercial 18% Distribution losses 13%

Total daily residential water use increased slightly and continued to account for more than half of all municipal water use in 1994. On a per person basis, daily residential water use fell from 334L per person in 1991 to 331L per person in 1994, a decrease of just under 1%. In 1994, Canadian households paying for water by volume used 263L per person per day, 39% less water than households paying a flat rate, which used 430L per person per day. The percentage of Canada’s municipal population with water meters increased from 52.4% to 54.3% between 1991 and 1994.

Freshwater Annual availability (1998) 2,849km 3 Per capita 94,373m 3 Annual withdrawal (1991) 45.10km 3 Domestic 11% Industrial 80% Agriculture 9%

Prospects for the private sector While the private sector is typically regarded as having a minimal role in Canada’s water and sewerage services, the reality is that of a steadily increasing presence. In the wake of the Walkerton tragedy, in which polluted water killed seven people in Ontario in 2000, a number of national and regional plans have been carried out. It was evident that the municipality has run down its water testing and network maintenance operations to cut costs. In 2004, Ontario’s Liberal government indicated that private-sector participation may be considered in the wake of rising capital spending needs and some fatal service shortcomings. The proposed Safe Drinking Water Act will require mandatory licensing of all water testing laboratories and owners of municipal water systems and tighten standards for drinking water treatment and distribution. A proposed Sustainable Water and Sewage Systems Act will require municipalities to recover the full cost of water and sewer services from consumers. Aquatech has been in operation since 1981 and has 50 water and wastewater contracts covering 0.8million people. The company believes that it controls 60% of the private sector market share in Canada. There are three smaller operations in Canada, mainly operating at the O&M level.

Groundwater Annual availability (1998) 369.60km 3 Per capita 12,241m 3 Annual withdrawal (1990) 1km3 Domestic 43.3% Industrial 14.2% Agriculture 42.5%



MAJOR CITIES City 2000 2015 Status Toronto 4,572,000 5,679,000 N/A Montréal 3,480,000 3,754,000 N/A Vancouver 2,049,000 2,513,000 N/A Ottawa 1,081,000 1,231,000 N/A Edmonton 944,000 1,101,000 N/A Calgary 953,000 1,228,000 N/A

Resource study: Bulk water transport from the Great Lakes? During 1997-98, a number of unsolicited proposals sought to develop schemes for the shipping of fresh water from the Great Lakes to Asian markets where the cost of water provision would make the shipping fees viable. In retrospect, it is difficult to decide whether these schemes were red herrings or had been fully considered, but they were taken most seriously by a broad swathe of Canadian opinion and served to focus attention towards the integrity and value of Canada’s fresh water resources. Until these proposals were made, no value had been placed on the waters of the Great Lakes. They were protected by treaties between Canada and the USA, and treaties embracing the North American Free Trade Area (NAFTA) as a whole. At the same time, political sensitivities meant that water legislation had been heavily devolved to the Provinces, preventing a national approach towards these proposals. The International Joint Commission (IJC) published a report on the Protection of the Waters of the Great Lakes in February 1999. The IJC recommended an immediate moratorium on bulk water removal from the Great Lakes. Additionally, a Canada-wide accord prohibiting bulk removal of water is being developed with the provinces and territories to ensure protection of Canadian waters, based on the International Boundary Waters Treaty Act that was passed in 1911, implementing the Canada-U.S. Boundary Waters Treaty signed in 1909. Bill C-6, passed in December 2001, thus amended the 1911 IBWTA and will apply principally to the Great Lakes and other boundary waters, such as part of the St. Lawrence River in Ontario, the St. Croix and Upper St. John rivers and Lake of the Woods. Until a resource is regarded as being threatened, it can be overlooked. Indeed, the mechanisms to protect such a resource may need to be developed retrospectively, calling upon the assistance of international bodies so as to ensure its legitimacy. In this case, a number of Provinces were able to take unilateral action to prevent the shipment of bulk water from their areas of jurisdiction. This approach was in danger of being undermined by one Province adopting a contrary stance. The nature of water and its transmission imposes limits on the devolution of water regulation within a water basin.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company York Water strategy development US Water Moncton 20 year water provision PPP Greater Moncton Water Lake Huron 10 year water O&M Azurix NA



Greater Moncton Water US Filter/VE (France) 50,000 0 50,000 Aquatech Aquatech WMS (Canada) 88,000 768,000 800,000 US Water RWE (Germany) 600,000 0 600,000 Azurix NA RWE (Germany) 420,000 0 420,000

CENTRAL AFRICAN REPUBLIC PART 2: COUNTRY ANALYSIS


CENTRAL AFRICAN REPUBLIC The Central African Republic (CAR) had a population of 3.8million in 2002, 42% living in urban areas. Overall, 59% of people living in urban areas are regarded as having reasonable access to safe drinking water and 83% for sewerage. The former figure is for 1996 and compares with an estimate of 19% by the FAO in 1990. Making water provision viable In 1988, the CAR’s Société Nationale des Eaux de Centrafrique (SNE) was virtually bankrupt, with a negative equity equivalent to 50% of sales. At the beginning of 1989, Bouygues’ SAUR-Afrique was invited to develop a management plan and a related performance contract. In 1991, SAUR-Afrique was granted a 15 year concession to operate SNE’s assets. SODECA was capitalised in December 1991 as a limited liability company in which the State holds a 25% minority stake. SNE continues to exist as an asset-holding company. Under the authority of the ministry responsible for water, SNE and SODECA fix tariffs and modify them according to an agreed formula. In the Central African Republic, the privatisation of water took place in 1991, with the creation of Société de Distribution d'Eau de Centrafrique (SODECA) as an operating company and Société Nationale des Eaux de Centrafrique as an asset-owning company. 21% of staff left in the first year due to voluntary redundancies and natural wastage, but staff numbers have subsequently stabilised. The new private operating company was given two objectives: to cut water rates and to restore the sector's financial balance securely. In fact, in 1992, SODECA was allowed to increase the water rates for the first time since 1984. The rate for the first segment of consumption was doubled, while for hydrants it was increased by 16%, and for large consumers there was a rise of 65%. As a result, turnover from water sales increased from CFAF1.5 billion in 1992, to CFAF2.5billion in 1995. This rise was due both to the 1992 tariff increase and to sub-contracted engineering work on behalf of the asset-owning company. By 1996, the company had moved from near-bankruptcy in 1988 into a viable entity that was providing funds to the Central Government. At the same time, network expansion and upgrading has taken place along agreed lines. The next phase is bringing services from the street level to the household. A survey of 5,815 households in 1994-95 found that 96% did not have running water and 98% lacked internal lavatories. The capital Bangui had a 13% water connection rate and a 1% sewerage rate in 1993 with no sewage treatment facilities. The 2002-03 rebellion in the north of the country severely affected drinking water supplies, with no access to safe drinking water for the region, affecting 9% of the CAR’s population.

CHAD PART 2: COUNTRY ANALYSIS


CHAD After years of wars and concerns about the falling water levels of Lake Chad, VE is taking on a daunting task in seeking to revive the country’s water infrastructure. Such are the problems facing the country that privatisation is being seen in a more positive light than it would be under other circumstances.


Lake Chad Lake Chad is the only permanent fresh water source in Chad. In a severe drought, such as in 1984, it is possible to walk across the lake. It is the only lake in the Sahel Region, being a freshwater body of water with no outlet to the sea. Surrounded by a large wetland, the lake is rapidly disappearing because of irrigation and heavy usage. Lake Chad has dwindled from 350,000km² several hundred years ago, to about 25,000km² in the 1960s. Now it is only about 2,000km². What remains of the lake is now threatened by proposed mining and drilling in the area.


Regulatory background In March 2000, the government launched the preparation of a National Environmental Action Plan (PNAE), which ill be adopted by the end of 2002. Other supplementary actions are envisaged in the short term, particularly the incorporation of environmental aspects into the planning and programming processes used by the Ministries of Finance and Planning, beginning with the formulation of the 2001 budget, and the carrying out of a feasibility study of the most urgent cross-border environmental activities concerning Lake Chad. Following the adoption of the Law on Electricity and the Water Code in 1999, the government will continue to strengthen Société Tchadienne d'Electricité et de l'Eau’s (STEE) regulatory and institutional framework. The implementing legislation and the water and electricity regulatory bodies were put into place in September 2000. In addition, a feasibility study started in 2002 on water tariffs. The regulatory bodies will be allowed to adjust tariffs annually.


Water shortages are endemic In Chad, 76% of the population have no access to water. 79% lack access to proper sanitation and most people die at about 47 years of age.


Privatising STEE A concession agreement for the private management of STEE was signed on January 28 2001, which includes the government’s take-over of the long-term debts and the transfer to a separate debt-recovery structure of STEE’s short-term domestic l iabilities. The Agence Française de Developpement (AFD) is funding a €8.3 million stormwater drainage project in the eastern districts of the town of N'djamena. In addition to €10 million financing from the World Bank, the AFD is also providing €5.1 million for the privatisation of STEE.

CHAD PART 2: COUNTRY ANALYSIS


Groundwater Annual availability (1998) 11.5km 3 Per capita 1,669m 3 Annual withdrawal (1990) 0.1km3 Domestic 30% Industrial 0% Agriculture 70%

VE acquires STEE STEE is to be responsible for water and electricity for 7million people. The Chad Government will initially hold 100% of STEE. VE started a two year management contract involving F20 million investment including F10 million of share capital in a venture with a turnover by the end of the period of F180 million. VE will then become the majority shareholder in STEE. MAJOR CITIES

City 2000 2015 Status Ndjamena 1,043,000 1,935,000 STEE phased privatisation

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Urban areas O&M/majority ownership, water STEE Private sector company operations (Please see the relevant company entry for details)


STEE VE (France) Up to 7million 0 Up to 7million Sources: Daoussa, B C. (1999). Memorandum of Economic and Financial Policies for 1999-2000, 12th November 1999. IMF, Washington DC, USA. Daoussa, B C. (2000). Memorandum of Economic and Financial Policies for 1999-2000, 6th July 2000. IMF, Washington DC, USA.

CHILE PART 2: COUNTRY ANALYSIS


CHILE Chile has more or less completed a systematic privatisation of its urban water and sewerage service entities. The high price paid for EMOS, which serves Santiago, demonstrates that some of these companies have been most efficiently run in the past, while still offering prospects for growth through service extension, especially with regard to sewage treatment. There has been a recent shift away from asset sales to the concessional model.


Development of regulation Urban water provision and sewerage services have been in continuous development over the past 150 years. By the end of the 1970s, a large number of public services delivered drinking water or collected wastewater in the main cities of Chile, whose urban population then was 8.5million. Services were provided by the municipality, along with a number of private companies delivering drinking water and providing sewerage services in the upper part of the city. Sewerage was seen as under-developed and there were no sewage treatment works. As sewerage tariffs were notably low, any extension of sewerage coverage was entirely dependent on government funding. In 1977, water and sewerage activities were integrated on a regional basis. Two semi-autonomous utilities were created, EMOS in the metropolitan region and ESVAL, along with 11 regional services. A regulatory body, SENDOS, reporting to the Ministry for Public Works was also established. During the 1980s, EMOS started to contract out some maintenance activities. While water and sewerage coverage increased, the low level of tariffs did not allow these services to grow in terms of maintenance of the new systems and in terms of maintenance, rehabilitation and replacement of old systems. As a result, in 1989 a set of laws and regulations were passed and a regulatory body, totally separated from operational activities, was created. The reform also included laws that allowed the selling of EMOS and ESVAL to the private sector. EMOS and ESVAL were transformed into corporatised entities and their shares entrusted to CORFO, a government body. The companies follow regulations applied to private companies, although their annual budget has to be approved by the Finance Ministry. From 1990 to 1995, their tariffs rose by 70% so as to eliminate central government subsidies and to enable capital spending to be enhanced. During this period, urban water and sewerage coverage reached the highest levels of Latin America. The first sewage treatment works were built at the beginning of the 1990s, the first in Santiago being built in 1992. Since 1995, the government has concentrated on encouraging the privatisation of major water and sewerage entities through a series of share sales. Chile’s water sector privatization programme, started in 1998, has raised US$1.9 billion to date. The state holding company managing the minority stakes from privatizations already completed has estimated the government could reap $500 million from them. The remaining government shareholding in Aguas Andinas is 35%, in Esval 33% and in Essal around 49%.


Development of services Capital spending in 1995 US dollar terms has only recently picked up. In 1960-65, US$400 million was spent, falling steadily to US$200 million in 1976-80. In 1981-85 it recovered to US$325 million, easing to US$325 million in 1986-90 before reaching US$839 million in 1991-95.

% Water Sewerage Treatment 1965 53.5 25.4 0.0 1970 66.5 31.1 0.0 1975 77.4 43.5 0.0 1980 91.4 67.4 0.0 1985 95.2 75.1 0.0 1990 97.4 81.8 8.0 1995 98.6 89.2 14.0



Chile needs US$2.5 billion in capex in the medium term for water treatment and distribution (US$1.4 billion), wastewaster treatment (US$400 million) and sewerage (US$700 million). EMOS forecasts that it will need US$2 billion over 20 years so as to ensure the development of its sewerage network and its sewage treatment system. Three sewage treatment works are to be constructed in the medium term, so as to link in with the city’s sewerage network, as described below. Broadly speaking, Chile will need to spend US$5-6 billion in order to develop a universal sewerage and sewage treatment service in the longer term. The government approved a bill in 2004 which will permit the granting of concessions for storm sewerage systems. Capital spending needs for storm sewerage are in the region of US$1.7 billion, with US$690 million required in Santiago.


Privatisation and players To date, concessions and stake sales covering some 80% of Chile’s urban population have been awarded. The government seeks to sell off stakes in three municipal entities, during 2002-03 effectively covering all significant urban areas. Chile has been a popular market for a wide range of water companies.

Freshwater Annual availability (1998) 468.0km 3 Per capita 31,570m 3 Annual withdrawal (1985) 21.4km 3 Domestic (1987) 5% Industrial (1987) 11% Agriculture (1987) 84%

Current PSP developments To date, buyers for the two smallest regions have not been identified. Emssat and Emsa serve a total of 350,000 people. Otherwise, the privatisation process has been completed and indeed a secondary market has developed.

Groundwater Annual availability (1998) 140.0km 3 Per capita 9,444m 3

Regions privatised or due for privatisation

Region Company Population (million, 2003)

Date Comments

I ESSAT 0.43 06-2003 II ESSAN 0.50 12-2003 III EMSSAT 0.26 2004+ IV ESSCO 0.61 11-2003 V ESVAL 1.56 12-1998 Sold by AWG in May 2004 Metropolitan EMOS 6.13 06-1999 Acquired Aguas Cordillera VI ESSEL 0.79 03-2000 VII ESSAM 0.92 11-2001 VIII ESSBIO 1.88 10-2000 IX ESSAR 0.88 06-2003 X ESSAL 1.08 07-1999 XI EMSSA 0.09 2004+ XII ESMAG 0.15 06-2003

Population figures are for the total population, thereby more than covered by the urban water entities

MAJOR CITIES City 2000 2015 Status Santiago 5,467,000 6,495,000 EMOS privatised in 1999

Private Sector Contracts Awarded (Please see the relevant company entry for details) Location Contract Company Antofagasta 30 year sewage treatment concession Bayesa Santiago Stake sale of EMOS Agbar/Suez



Private Sector Contracts Awarded (Please see the relevant company entry for details) Location Contract Company Valparaiso Stake sale of ESVAL Consorcio Financiero Valdiva Water and sewerage concession Aguas Decima Santiago Water and sewerage Aguas Cordillera Santiago Water and sewerage Biwater Concepcion Stake sale of ESSBIO Thames Water (RWE)


Water Sewerage Total ANSM/ESSAM RWE (Germany) 400,000 400,000 400,000 EMOS Agbar (Spain)/Suez (France) 5,100,000 5,000,000 5,100,000 ESVAL Consorcio Financiero (Chile) 1,400,000 1,350,000 1,400,000 ESSCO Consorcio Financiero (Chile) 500,000 475,000 500,000 ESSEL RWE (Germany) 600,000 600,000 600,000 ESSBIO RWE (Germany) 1,500,000 1,500,000 1,500,000 ESSAL Iberdrola (Spain) 400,000 200,000 400,000 ESSAT SACI Falabella (Chile) 410,000 400,000 400,000 ESSAR SACI Falabella (Chile) 580,000 520,000 580,000 ESMAG SACI Falabella (Chile) 150,000 150,000 150,000 Biwater Biwater (UK)/Nuon (Ned) 10,000 10,000 10,000 Bayesa Biwater (UK)/Nuon (Ned) 0 300,000 300,000 Aguas Decima Agbar (Spain) 120,000 90,000 120,000 Aguas Quinta Agbar (Spain) 200,000 150,000 200,000 Aguas Cordillera EMOS (Chile) 315,000 295,000 315,000

CHINA PART 2: COUNTRY ANALYSIS


CHINA Since 2000, China has been the driver for global demand for private sector contracts. BOT and concession-type contracts are now regularly awarded to international companies and in specific cases, along with the vesting of operational control. Sewage treatment and industrial outsourcing contracts are also becoming prominent. The market has also been marked by the emergence of local companies and expatriate Chinese companies, typically based in Malaysia and Singapore, along with those based in Hong Kong. One cautionary element has been the enaction of a law outlawing fixed returns by foreign held entities.


A diversion? China is planning to build a pipeline and canal network to divert 48-50billion m 3 of water pa from southern parts of the country to the north. The project, first proposed by Mao Zedong in 1952 – was due to start after 2002 and be completed by 2010 but currently remains on hold. The US$64 billion cost of the project and technical problems have kept it on hold for 40 years. There are three options under consideration: to transport water from the lower Yangtze River, with water being pumped uphill for hundreds of kilometres ; to use canals and pipelines to move water from the Han River, a tributary of the Yangtze; and to divert water from the so-called "western line" at the headwaters of the Yangtze and possibly the upper Mekong and Irrawaddy rivers. The driver is the disparity between population and water resources: 80% of water resources are in the Yangtze River Valley, compared with 54% of China’s population and 35% of arable land whereas 44% of the population live to the north of the valley, but they only have 15% of water resources. The US$24 billion Three Gorges Dam project being constructed along the Yangtze River demonstrates the potential pitfalls of such a project. In 2000, 23.4billion tons of sewage and industrial waste were dumped into the Yangtze River basin, 11% more than in 1999. The 660km reservoir system started holding water in 2004, and without suitable measures, will trap pollution dumped by cities upstream. In 2004, the State Environm ental Protection Administration (SEPA) assessed its Three Gorges Anti-Water Pollution Plan. To date, 93% of industries have yet to achieve zero emissions or emission recycling, against an aim of reducing industrial pollution in the Three Gorges Reservoir by 30% by 2005. Indeed, 35% of projects had yet to start and 75% of facilities continue to discharge effluents at their pre-plan levels.

Water and sewerage development 1980 1993 Piped water (billion m3/pa) 8.83 45.02 Domestic (billion m 3/pa) 3.39 12.83 Access to piped water 81.4% 93.1% Sewage removal (m t/pa) 16.43 31.68 Sewer pipes (km/1000) 0.24 0.45

In 1993, the country had 600,000km of urban water pipes, with distribution losses estimated at 25% for urban water provision and higher for industrial water. At the time, there were 66,329km of sewerage mains, along with a total of 87 sewage treatment works, 34 primary and 53 secondary. According to the Government, all people in rural China will have access to potable water by the end of 2004. Supplies were secured for 24million people during 2002 and 15.6million more gained access to potable water at the end of 2003. A further 24million are to be connected during 2004.

Population Total (2002million) 1,294.9 Total (2015million) 1,402.3 In urban areas (2002) 38% In urban areas (2015) 50% In urban agglomerations (2015) 17%

Legal framework The Government has passed 13 water conservation laws since 1989, along with a framework water law in 1985. Main elements are: The Water Act (1988), The Management Stipulation of Urban Water Conservation (1989) and The Water Consumption Quota Measure (1989). The 2001 Chinese Guidelines on Drinking Water Quality cover drinking water standards and groundwater resource protection.



Billing has a low priority, and this will remain the case in the foreseeable future. It is up to the municipality or Province to pay for services. Prices usually cover 10-25% of real costs, and with constant inflationary pressures, Beijing would not authorise any moves to improve cost recovery.

Urban Services Safe drinking water 97% L per capita per day 220 Access to sewerage 58% Sewage treated 34%

Water quality and quantity In 2004 the Ministry of Water Resources estimated that China's economy is 85% below the global efficiency average in water consumption. This is in part due to outdated plant and management techniques, but mainly as a result of artificially low water fees. The Ministry of Construction and the Beijing municipality, acting under the authority of the State Council, have issued rules aimed at rationalising water tariffs to encourage efficiency. Currently, over 400 out of the leading 600 Chinese cities are short of water, with Beijing and Tianjin, the national capital and a major port city in the north, at a critical moment of water shortage. Meanwhile, rural people in some arid areas also have to endure acute water shortage, either for farming or drinking. China discharged 43-50billion m3 of wastewater in 2000-2001 (various estimates), including 20billion m3 of industrial wastewater. The annual increase in effluent discharge estimated at 2.4million m3 pa in 1999. 63% of rivers tested in 1998 were at or below class four (bad to very bad, equivalent to abiotic) on China's five-tiered water-quality scale. Of urban water sources, 90% are also polluted. In 1997, China spent 1% of its national budget on environmental protection. Water shortages in cities cause a loss of an estimated US$11.2 billion (RMB120 billion) in industrial output, while the impact of water pollution on human health has been valued at US$3.9 billion (RMB41.73 billion). At the end of 2000 (9th Five Year Plan) there were 427 WWTWs in China, including 282 to secondary standard, with a total treatment capacity of 14.75million m3 per day. US$3.6 billion was spent on building 317 municipal Wastewater Treatment Works (‘WWTWs’) in 1998-2002, via internal treasury bonds. At the end of 2002, there were 452 WWTWs in operation, with a capacity of 31million m3 per day. China recycled 40% of its urban wastewater, compared with 75-80% in developed economies. Treatment capacity is to exceed 30million m3 per day by the end of the 10th Five Year Plan in 2005. In addition, US$2.6 billion will be spent cleaning up Beijing’s water system. Since 2001, all 699 cities and urban areas with a population of more than 500,000 are meant to develop appropriate sewage treatment facilities for 60% of effluents by the end of the 10th Five Year Plan (2001-2005). All cities are meant to charge a sewage treatment levy by the end of 2003. Shanghai, Jiangsu and Zhejiang and the other main industrialised cities will have 50% of facilities at a cost of US$9 billion, treating 22million m3 of effluent per day. In June 2003, the State Environmental Protection Administration (SEPA) announced that China's treatment capacity will double from 25million m3 pa to 58million m3 pa by 2005, with an investment of US$14.5 billion. In total, US$36 billion is to be spent between 2000 and 2010 on WWTWs. In 2001-2005 (10th Five Year Plan), 375 WWTWs are to be built. China seeks to develop its urban water supply to meet World Health Organization (WHO) standards by 2010. By the end of 2000, 96.7% of China's urban population lived on urban water supply systems with daily water usage per capita amounting to 220.2l. 34.3% of urban sewage was treated in 2000. In 2000, 34.3% of urban sewage was treated. That will rise to 40% by 2010. In rural areas, 500million people have access to tap water, with 106million having improved sanitation facilities. The country's rural areas have seen 674,000 waterworks built along with 48.91million wells. By the end of 2000, 880million Chinese rural residents, or 92.4% of the country's rural population, had improved water services, with 106million rural dwellers having modern toilets, taking the incidence of such toilets in rural areas to 44.8%. However, WHO estimates for 2000 point to 66% and 27% coverage respectively.

Freshwater Total (1998, km 3) 2,800.00 Per capita (1998, m3) 2,231 Withdrawals (1980, km3) 525.5 For domestic use (1987) 5% For industry (1987) 18% For agriculture (1987) 77%

Estimates of Chinese urban sewerage treatment capacity and technology/equipment market:

Treatment rate (%) 10.8 22 35 50 Treatment capacity (M tons/day) 10.44 22.20 38.70 60.25 Current capacity (M tons/day) - 10.44 22.20 38.70



Construction required (M tons/day) - 11.76 16.50 21.55 Investment for construction (billion Rmb) 9.0 14.1-17.6 19.8-24.7 25.8-32.3 Yearly operation cost (billion Rmb) 1.57-2.5 3.33-5.28 5.81-9.9 9.04-14.46 Technology/equipment market size (billion Rmb) - 4.94-7.92 6.93-11.11 9.05-14.55

Source: China Environmental Protection Industry Association 2001. During the Tenth Five-Year Plan (2006-10), China plans to devote RMB700 billion to environmental protection, among which RMB210 billion will be invested in water treatment. China aims for a sewage treatment ratio reaching 60% percent nationwide by 2005 and 100% percent in all big cities by 2010. Privatisation and politics Water provision is subsidised in order to ensure its universal availability in urban areas. This applies both to piped water and water provided by vendors. The supply of water has deteriorated both in terms of availability and the quality of the water provided because of the lack of funding. On average, water accounts for 0.5% of household expenditure. In consequence, domestic water use in urban China is at an appreciably higher level than is currently sustainable. There have been a number of developments at the municipal level designed to eliminate subsidies, while ensuring that water services are both of a higher quality and affordable (up to 1.5% of average household expenditure). The State Development Planning Commission (SDPC) has announced that urban residents and enterprises will pay higher prices for excess water consumption by the end of 2005, and sewage processing fees will be charged throughout the country by the end of 2003, on the basis of cost recovery. Water fees will vary according to the season and local conditions, with recycled water priced much lower than tap water to encourage its use. At the end of 1999, Chinese and expatriate companies served 11million people against 15million being served by international players. More recently, water and sewerage privatisation has moved forward at a dramatic rate. Since 2000, contracts serving further 21million people have been awarded to international companies, while contracts serving 36million people have been awarded to Chinese and expatriate companies. International companies seeking to enter this market need official support from at least one of the main Beijing government bodies. The State Planning Commission (SPC) approves BOT projects. The Ministry of Construction (MOC) approves STW construction and operation projects inside cities, having been involved with the private sector since 1993 with the water and sewerage sectors. The Ministry of Water Resources (MWR) is responsible for non-urban areas. While the MWR is still responsible for major infrastructure projects, it is much less powerful than the MOC, and therefore the MWR is not seen as important when seeking international BOT proposals. The State Environmental Protection Administration (SEPA, formed in 1998) looks after STWs and industrial effluent treatment projects. The NEPA works with provincial EPAs, which are essential partners for sewerage and sewage treatment BOT projects. To date, all such projects have in fact remained in state hands, whilst mobilising finance from international multilateral agencies. The Chinese Government formally opened the national urban utility market to domestic and overseas investors in 2003. Domestic and foreign investors would be allowed to invest alone or cooperate with local authorities or enterprises. The ministry would further promote charges for sewage and refuse treatment in 2003, and deepen the price reform of water supply, so as to establish a price system adapted to the market economy.

Groundwater Total recharge (1998, km3) 870.00 Per capita (1998, m3) 693 Withdrawals (1985, km3) 75.0 For agriculture (1985) 54%

Chinese private sector players Three broad approaches are being used by the private sector in China. Firstly, international companies working with joint ventures or through specialist funds. Joint ventures Sino-French Holdings (Suez and New World), and the leading dedicated fund is the China Water Company, which is held by RWE (49%), Temasek Holdings (Singapore Government) and Hong Kong Land (Jardine) or the setting up of Chinese owned private sector companies. Restrictions on returns by foreign owned and controlled entities have meant that stakes in ventures such as Thames Water’s Shanghai have been sold back. Secondly, a major expatriate Chinese market has developed. To date this has mainly come from ‘expatriates’ in Hong Kong and from Malaysia and Singapore. The development of this market outside Hong Kong has taken place since 2000. The largest market in terms of recent developments is that of nationally based Chinese companies. These can either work on their own or in partnership with international companies. To date six examples of the third approach have been identified. One, Shenzen Overseas Chinese Town Co is indirectly concerned with the sector, concentrating on the development of tourist facilities for Shenzen, including water services. The Suzhou



New District Hi-Tech Industrial Co Ltd carried out the development and operation of water, road, gas and power services for the city’s Hi-Tech Industrial Development Zone. Shenyang Public Utility is responsible for most of Shenyang’s water provision. Three others (Shanghai Lingqiao Tap Water Co, Shanghai Municipal Raw Water and Wuhan Sanzheng Industry Co Ltd) are primarily concerned with water provision projects and services. In all cases, a majority of the company’s shares continue to be directly or indirectly in state or municipal hands. By the end of July 2004, contracts covering 31million people have been awarded to Chinese companies, along with 16million through expatriate Chinese companies. International companies serve 36million, in all cases through joint ventures. However, at the end of 1999, Chinese and expatriate companies served 11million against 15million being served by international players. Thus while Chinese and expatriate companies have privatised services affecting 36million more people since 2000, international players have moved more modestly ahead with 21million people. Companies noted Water treatment facilities constructed by Degremont (Suez) and Purac (AWG) in China serve 100million and 40million people respectively. These companies have been active in the market since the 1970s and effectively pioneered the return of western engineering concerns to the country.

MAJOR CITIES Population 2000 2015 Status Anshan 1,453,000 1,592,000 N/A Anshun 789,000 1,554,000 N/A Baotou 1,319,000 1,612,000 N/A Beijing 10,839,000 12,671,000 Water treatment BOT Benxi 957,000 1,065,000 N/A Changchun 3,093,000 4,944,000 N/A Chengde 1,374,000 1,774,000 N/A Changsha 1,775,000 2,674,000 N/A Chengdu 3,294,000 4,030,000 VE has a water treatment & provision BOT Changzhou 886,000 1,202,000 N/A Chifeng 1,087,000 1,318,000 N/A Chongqing 5,312,000 7,440,000 Bulk water and wastewater BOT Dailan 2,628,000 3,048,000 Water treatment BOT Daqing 1,076,000 1,275,000 Water treatment BOT Datong 1,165,000 1,210,000 N/A Dongguan 1,319,000 1,250,000 Bulk water concession Fushun 1,413,000 1,565,000 N/A Fuxin 785,000 910,000 N/A Fuyu 1,025,000 1,223,000 N/A Fuzhou 1,397,000 1,519,000 Private sector involvement under consideration Guangzhou 3,893,000 4,418,000 Various water and WW contracts Guiyang 2,533,000 3,965,000 N/A Handan 1,996,000 2,481,000 N/A Hangzhou 1,780,000 2,388,000 N/A Harbin 2,928,000 3,135,000 Water treatment BOT Hefei 1,242,000 1,550,000 N/A Heze 1,600,000 2,406,000 N/A Huaian 1,232,000 1,504,000 N/A Huaibei 814,000 1,246,000 N/A Huaianan 1,354,000 1,643,000 N/A Huhehaote 978,000 1,040,000 N/A Hunjiang 772,000 907,000 N/A Huzhou 1,077,000 1,235,000 N/A Jiamusi 874,000 1,311,000 N/A Jiaxing 791,000 928,000 N/A Jilin 1,435,000 1,712,000 N/A Jinagmen 1,153,000 1,445,000 Two water and one WWTW BOT Jinan 2,568,000 2,791,000 Seven water BOTs Jining 1,019,000 1,323,000 N/A Jinzhou 1,313,000 1,932,000 N/A Jinxi 1,821,000 2,775,000 N/A Jinzhou 834,000 1,047,000 N/A Jixi 949,000 1,194,000 N/A Kaifeng 769,000 942,000 N/A Kunming 1,701,000 1,962,000 N/A Lanzhou 1,730,000 2,024,000 N/A Leshan 1,137,000 1,324,000 N/A



MAJOR CITIES Population 2000 2015 Status Linqing 891,000 1,286,000 N/A Linyi 2,498,000 4,076,000 Strategic partnership agreement for water supply Liuan 1,818,000 2,491,000 N/A Liupanshui 2,023,000 2,435,000 N/A Liuzhou 928,000 1,283,000 Two wastewater treatment plants Louyang 1,451,000 1,951,000 N/A Mianyang 1,065,000 1,446,000 N/A Mudanjiang 801,000 939,000 N/A Nanchang 1,722,000 2,661,000 Wastewater BOT Nanchong 1,055,000 1,614,000 One bulk water BOT Nanjing 2,740,000 3,132,000 Industrial water BOT, wastewater BOT Nanning 1,311,000 1,639,000 N/A Neijiang 1,393,000 1,653,000 N/A Ningbo 1,173,000 1,313,000 N/A Pingxiang 1,502,000 1,783,000 N/A Qingdao 2,316,000 2,801,000 Water BOT Qiqihar 1,435,000 1,601,000 N/A Shanghai 12,887,000 13,598,000 A wide range of contracts & companies Shantou 1,176,000 1,558,000 N/A Shenyang 4,828,000 5,105,000 Shenyang Public Utility floated in 1999 Shenzhen 1,131,000 1,460,000 Bulk water partially privatised Shijiazhuang 1,603,000 2,076,000 UNDP commercialisation project under way Suining 1,428,000 1,788,000 N/A Suqian 1,189,000 1,470,000 N/A Suzhou 1,183,000 1,813,000 Local company for industrial development zone Taian 1,503,000 1,749,000 N/A Taichung 950,000 1,344,000 N/A Taiyuan 2,415,000 2,871,000 N/A Tangshan 1,671,000 2,074,000 N/A Tianjin 9,156,000 10,319,000 VE & SFH in bulk water JVs Tianmen 1,779,000 2,371,000 N/A Tianshui 1,187,000 1,501,000 N/A Tongliao 785,000 1,017,000 N/A Wanxian 1,759,000 2,447,000 N/A Weifang 1,287,000 1,586,000 N/A Wenzhou 1,269,000 1,940,000 Water treatment BOT Wuhan 5,169,000 7,833,000 Wuhan Sanzheng Industry Holding Wulumqi 1,415,000 1,924,000 N/A Wuxi 1,127,000 1,391,000 N/A Xian 3,123,000 3,714,000 Water treatment BOT Xiangxiang 908,000 1,061,000 N/A Xiantao 1,614,000 2,126,000 N/A Xianyang 896,000 1,218,000 WTW BOT Xiaoshan 1,124,000 1,236,000 N/A Xinghua 1,556,000 1,766,000 N/A Xintai 1,325,000 1,461,000 N/A Xinyu 973,000 1,182,000 N/A Xuanzhou 823,000 1,216,000 N/A Xuanzhou 823,000 968,000 N/A Xuzhou 1,636,000 2,497,000 N/A Yangchen 1,562,000 1,997,000 N/A Yantai 2,080,000 4,665,000 N/A Yichun (H’ang) 904,000 1,012,000 N/A Yichun (Jiangxi) 871,000 994,000 Water treatment BOT Yixing 1,108,000 1,259,000 N/A Yiyang 1,343,000 1,904,000 PSP currently under consideration Yonzhou 1,097,000 1,413,000 N/A Yueyang 1,213,000 1,507,000 N/A Yulin 1,558,000 2,037,000 N/A Yuyao 848,000 995,000 N/A Yuzhou 1,173,000 1,411,000 PSP WWTW project being tendered for Zaoyang 1,121,000 1,450,000 N/A Zaozhuang 2,048,000 2,582,000 N/A Zhangilakou 880,000 1,204,000 N/A Zhangjiangang 886,000 1,094,000 N/A



MAJOR CITIES Population 2000 2015 Status Zhanjiang 1,368,000 2,008,000 One water BOT Zhaodong 851,000 998,000 N/A Zhengzhou 2,070,000 2,711,000 Bulk water BOT Zibo 2,675,000 3,148,000 N/A Zigong 1,072,000 1,295,000 N/A

The 109 cities forecast in 2003 to have a population in excess of 1million by 2015 is a significant increase on the number in the 1996 UN urbanisation assessment. This is due to better data as well as major cities such as Shenyang fragmenting into several autonomous entities. It is also of interest to note that there has been some scaling back of the 2015 population forecasts since the 2001 edition of the Masons Water Year Book? City Study: Shanghai The Shanghai Water Resources Bureau operates the city’s water and sewerage services. All of the urban area’s 7,496,500 people are supplied with piped water via 1,499,300 connections, using an average of 193l of water per day. All connections are metered, with the quality of water generally being regarded as low although water treatment works nominally account for 104% of water demand. There is no surcharge for sewerage services. Water costs US$0.13 per m3, with no price adjustment made for the volume used. Shanghai’s main challenges are developing its infrastructure for continued growth, industrialisation and water pollution. Greater Shanghai saw the construction of 31 WWTWs between 1980 and 2002 at a cost of RMB10 billion, treating 44% of the 5.40million m3 of effluents generated each day. There are plans for 27 more, including 14 between 2001 and 2006, with two major works in construction: The Zhuyuan Wastewater Treatment Plant, 1.70million m3 per day is being constructed and operated (20 years) by Youlian Enterprise Development Company and two other private players. RMB0.87 billion is to be invested in the project, which started in 2002. The contract is for the operation of the Shanghai Zhuyuan No 1 Sewage Treatment Factory. YEDC, along with two other private companies, will invest CNY870 million (€107 million), raising its capacity to 1.7million tonnes per day during the contract period. The Bailonggang Wastewater Treatment Plant will handle 1.2million m 3 per day at a cost of RMB060 billion. Both were expected to be in service by the end of 2003. In 1995, a consortium led by Thames Water and Bovis (P&O) was awarded a 20 year. BOT contract to build and manage a water treatment plant at Da Chang, generating 0.4m m3 of potable water per day. In 2002, the State Council issued a note requiring all fixed return water contracts held by foreign entities to be restructured. Thames Water subsequently sold its stake in the venture back to the municipality. A second water treatment plant is currently being upgraded by Degrémont, on a stand-alone basis. In addition, Shanghai has two semi-private water companies. The Shanghai Lingqiao Tap Water Co. distributes water to the Pudong district of the city of Shanghai. The Shanghai Municipal Raw Water Co Ltd. abstracts water from the Yangtze and Huangpu rivers for treatment at the Shanghai municipality’s water treatment stations. The company builds and operates the pumping stations, canals and reservoirs necessary for the bulk water provision to the city. Shanghai also aims to become an 'oriental water metropolis' with the municipal government promising a US$50 million investment by 2008. This year, the city plans to build water rings linking the Dianpuhe river to Suzhouhe river and Huangpujiang river via Xinjing Port and West River, developing them as new scenic spots combining sightseeing, tourism and shopping, according to the director. City Study: Beijing (Peking) The Beijing Municipal Water Works Co. and the Beijing Water Resources Bureau operate water and sewerage services. The city’s population of 5,769,600 has 1,153,920 connections, with 95% of the population receiving piped water. The average water consumption is 149l per capita per day. Water quality is regarded as poor, partly because of the contamination of the groundwater resources that supply 69% of current needs. In 1991, water prices were increased from 0.25Y per m³ to 0.45Y per m³ for industrial and commercial customers and from 0.12Y/m³ to 0.30Y/m³ for domestic customers. There are a total of 194,000 water meters, 175,000 for domestic customers and 14,000 for industrial and commercial customers. Distribution losses are officially estimated at 7.5% although in reality they are approximately 28%.

Year 1993 1996 2000 Capacity (million m³ per day) 1.90 2.30 3.00 Demand (million m³ per day) 1.95 2.50 3.10

In Beijing, 60% of the city was served was served by sewers in 1993, with the other 40% served by night soil carriers. In 1991, 3.6% of the city’s sewage was treated in 1991, which increased to 18.5% in 1992. Officially, six WWTWs currently handle 50% of the city’s effluents. 2 WWTWs handle 1.6million m3 per day, 85% of the total treated. In September 2003, bids will be invited for five new local WWTWs with a combined capacity of 0.16million m3 per day. One further WWTW is planned to be built, with the aim of 87% of effluents being treated by the start of the 2008 Olympiad, or 2.62million m3 per day. The Beijing Gaobeidian Sewage Treatment Plant will be the largest in China.



In the Greater Beijing area, the total abstraction was 3,564million m³ pa in 1992, and is forecast to rise to 3,800million m³ pa in 2000 and 5,140million m³ by 2020. Groundwater is heavily used for agriculture (1,447million m³ pa) and it is estimated that groundwater over-abstraction is currently running at 2,000–2,700million m³ pa. Because water is scarce across Northern China, there is little scope for increasing the use of the Miyun and Guanting rivers, which flow in the region. The total water availability is currently at 400m³ per capita pa. Water demand is to outstrip supply by 70% during 1991-2000. As a consequence, in November 1992, fees for water supply were fixed to usage, along with quotas for water usage. The current emphasis is to boost water supplies via upgrading and expanding the Number 9 Water Treatment Plant. The municipality is playing off various sources of funding for this project. In addition, World Bank funding is being sought for upgrading the Gao Bei Dian Treatment facility. The Beijing No 10 treatment plant, awarded to Awg is to cost US$300 million, covering 15% of the city by the time it enters service. In June 2001 a RMB22 billion (US$2.6billion) plan was started to ease water shortages in the capital city within five years. It involves 20 projects for water resource development, pollution protection, rain and flood water utilisation, building of water-saving and ecological agricultural developments around the reservoir areas and water quality monitoring. In total, Beijing anticipates spending US$12 billion in the run up to the 2008 Olympics to improve its environmental performance. This includes an increase in sewage treatment from 45% in 2000 to 90% by 2007, with treatment capacity rising from 1.26million tonnes per day to 2.62million tonnes per day through US$870 million being spent on seven large plants, and US$750 million on 15 smaller facilities. Prior to the construction of four facilities in the past few years, there was effectively no sewage treatment in the city.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Changtu 30 year O&M, water provision Sino French Holdings Wanzhou 30 year O&M, water provision Sino French Holdings Zhongstan 22 year O&M, water provision Sino French Holdings Zhengzhou 30 year O&M, water provision Sino French Holdings Baoding 20 year O&M, water provision Sino French Holdings Lianjing 30 year O&M, water provision Sino French Holdings Chongqing 30 year build & manage, water provision Sino French Holdings Tianjin 35 year concession, water provision Sino French Holdings Tanzhou 30 year O&M, water provision Sino French Holdings Guangzhou 30 year O&M, water provision Sino French Holdings Gaozhou 30 year O&M, water provision Sino French Holdings Sanya 30 year O&M, water provision Sino French Holdings Nanchang 28 year O&M, water provision Sino French Holdings Shanghai Pudong, industrial water JV Sino French Holdings Sanya 35 year concession, water provision Sino French Holdings Qingdao 25 year BOT, water provision Sino French Holdings Shenyang 30 year O&M, water provision Shenyang Public Utility 11 cities 25 year BOT, sewage treatment Sound Group 4 cities 25 year BOT, water treatment China Water Company Hexian 20 year jv operation AWI Changli 30 year water and sewerage contract Earth Tech Guangzhou 20 year DBFO, sewage treatment Earth Tech Shanghai 50 year O&M, water services VE Chengdu 18 year BOT, water provision VE Tianjin 20 year ‘concession’, water provision VE/Marubeni Zunyi 35 year concession, water treatment CGE Zunyi Water Shanghai 20 year ‘concession’, water provision Shanghai Fengxian Saur Water Beijing 23 year BOT, water treatment AWG Tiazhou 18 year BOT, bulk water provision AWG Harbin O&M, water treatment plant Bouygues Foshan 25 year BOT, wastewater treatment Aquamundo Chongqing 25 year BOT, wastewater treatment Aquamundo Liuzhou 25 year BOT, wastewater treatment Global Green Tech Deqing 15 year BOT, water treatment Globe Environment Nanjing Industrial wastewater treatment BOT Nanjjng Sembcorp Suiyu Dao Bin Shan 23 year water treatment BOT Shenfei Dayen Shenyang Water and wastewater treatment BOT Shenfei Dayen Beijing Industrial water & wastewater treatment Shenfei Dayen Beijing 20 year sewage treatment BOT Kerry Utilities Jiangmen Wastewater treatment BOT AGEPSG Nanchong Water treatment concession Berlinwasser International Xian Water treatment BOT Berlinwasser International Shanghai 20 year wastewater treatment BOT Youlian Beiging Wastewater treatment BOT Beijing Capital Four cities Water treatment plant BOTs Cathay International Water



Private sector contracts awarded (Please see the relevant company entry for details) Shenzen Bulk water concession GDI Donnguan Bulk water concession GDI Nanhai Water supply Nanhai Development Nanjing Wastewater treatment BOT SIHL Zhanjiang Bulk water treatment BOT SIHL Xiamen Water & wastewater concession SIHL Hanzhong Water BOT Interchina Qinhuangdao Wastewater BOT Interchina Xianyang Water BOT Interchina Ma’anshan Wastewater BOT Interchina Nanchang Water supply Jiangxi Hongcheng Waterworks Nanchang Wastewater BOT BWB (VE) Shandong Water operations Salcon Water Yichun 30 year water BOT PBA Holdings Zun Yi 35 year wastewater BOT VE

City Study: Guangzhou (Canton) The Guangzhou Water Resources Bureau serves 92% of the central area’s 2,914,300 people through 728,575 connections. All water connections are metered. Of the city’s sewage was treated in 1998, against an official target of 25%. In consequence, 2.7million tonnes of untreated effluent only 10% are discharged into the Pearl River daily and the local authority regards the river as biologically dead. A 7% ‘Environment Tax’ is levied in hotels, but there is no indication of how these funds are used. In 2002, Earth Tech was awarded a US$120 million DBO contract that over two phases will treat 0.4million m3 of wastewater per day, or 15% of the current total discharge.

Private sector company operations (Please see the relevant company entry for details) Population served Company Parent company

(country) Water Sewerage Total Shenfei Dayen Dayen (Singapore) 0 125,000 125,000 Kerry Utilities PPB (Malaysia) 0 1,000,000 1,000,000 Nanjing Sembcorp Suiyu Sembcorp (Singapore) 0 0 0 AGEPSG Anhui Guozhen (China) 0 255,000 255,000 Berlinwasser International RWE/VE 3,200,000 0 3,200,000 Pinang Water PBA (Malaysia) 500,000 0 500,000 Sino French Holdings Suez (France) 12,900,000 0 12,900,000 Vivendi Water VE (France) 8,600,000 0 8,600,000 Sound Group Sound Group (PRC) 0 5,000,000 5,000,000 Bovis Thames (Shanghai) RWE (Germany) 2,000,000 0 2,000,000 Shanghai Lingqiao Tap Water Shanghai municipality N/A 0 N/A Shanghai Municipal Raw Water Shanghai municipality N/A 0 N/A Shenyang Public Utility Shenyang municipality 5,750,000 0 5,750,000 Suzhou New District Suzhou municipality 100,000 0 100,000 Wuhan Sanzheng Industry Wuhan municipality N/A 0 N/A AWI Awg (UK) 3,760,000 0 3,760,000 Earth Tech Tyco International (USA) 150,000 750,000 750,000 Shanghai Fengxian Saur Water Bouygues (France) 3,500,000 0 3,500,000 China Water Company RWE (Germany) 3,500,000 500,000 4,000,000 Cheung Kong Infrastructure Privately held (PRC) N/A N/A N/A Global Green Tech Global Green Tech (HK) N/A 800,000 800,000 Aquamundo Amiantit (Saudi) N/A 400,000 400,000 Globe Environment Darco (Singapore) 450,000 0 450,000 Cathay International Water Cathay International (HK) 4,000,000 0 4,000,000 Beijing Capital Group Beijing Capital (China) 1,500,000 5,500,000 5,800,000 GDI GDI (HK) 1,500,000 0 5,800,000 Nanhai Development Nanhai Development Co 1,100,000 0 1,100,000 SIHL Shanghai Ind. Holdings 1,750,000 2,500,000 4,000,000 CGE Zunyi Water VE (France) / Citic 500,000 0 500,000 Interchina IH (HK) 900,000 900,000 1,800,000 Jiangxi Hongcheng Waterworks J H Waterworks 1,550,000 0 1,550,000 PBA Holdings PBA Holdings (Malaysia) 250,000 0 250,000 Salcon Water Salcon Eng (Malaysia) 1,250,000 0 1,250,000 Zun Yi VE (France) 0 600,000 600,000

Source: Lee, S. (2003) The Transformation of the Shanghai Water Sector in the Reform Area: Social Actors and Institutional Change. PhD Thesis, SOAS, London University

COLUMBIA PART 2: COUNTRY ANALYSIS


COLOMBIA Privatisation has been advancing steadily since 1994, but the Colombian market offers plenty of prospects and is perhaps overlooked when compared with some South American economies. In general, service coverage is good, but there is plenty of scope for improving service delivery, efficiency and sewage treatment. The Suez WWTW concession ended in 2004 after a dispute with the government.


Privatisation plans Privatisation has been supported since 1994, starting with Law Number 142 of 1994. This Law provides incentives for private firms to join local and regional authorities in the task of upgrading water, sewerage and sewage treatment services. In reality, privatisation remained the exception until the passing of Law Number 226 of 1995. This established the basic rules for approval of each programme. This Law gives the company’s employees and retirees, as well as other employee-owned cooperatives, unions and organisations, the first option to purchase the entity.


Legal framework and service delivery Municipal water and sewerage entities serving a population in excess of 8,000 have been identified as potentially suitable for private sector management and investment. The Law on Environmental Principles (Law Number 99 of 1993) lays out various environmental and public health service objectives, which are to be administered by the Ministry of the Environment. A report by IDEAM, the Instituto de Hidrología, Meteorología y Estudios Ambientales , warns that 70% of Colombia's population may face water shortages within the next 15 years if water resources are not properly managed. Drought has already caused water shortages in 7 cities in Valle del Cauca, Huila, Boyaca, Norte de Santander and on the Atlantic coast. The three largest cities in Colombia, Bogotá, Medellín and Cali, officially have a service coverage of around 94% for piped water and 87% for sewerage.

Urban Data Served by piped water 76% Access to sewerage 88%

Concession awards to date According to the International Labour Organisation (ILO), by 1998 there had been two privatisations prior to the 1994 law and a further 10 since then.

Freshwater Annual availability (1998) 1,070km 3 Per capita 28,393m 3 Annual withdrawal (1987) 8.9km3 Domestic (1987) 59% Industrial (1987) 4% Agriculture (1987) 37%

Prospects Colombia retains a notably low profile for a country of its size and economic development. The main international players seen to date have been Acea, Agbar and FCC. The World Bank is loaning US$85 million for water supply and sewerage service extension work in Cartagena and the bay area. The project covers 750,000 people. One third of the city’s inhabitants are not connected to piped water or sewerage. This is being linked to the concession being managed by Agbar for services to the city.

COLUMBIA PART 2: COUNTRY ANALYSIS


Privatisation schemes are currently being developed in Barranquilla, Palmira, San Andres and Buenaventura. Proposals for the cities of Riohacha and Neiva did not reach fruition. These are open for reconsideration if suitable funding and management packages can be developed. In December 2001 the government announced that it would privatise Emcali, the municipal services company of Cali, which provides water, sewerage, electricity and telecomms to the city. After Emcali’s offices were occupied in, the proposals were abandoned, along with a price freeze and an enquiry into corruption by the company’s management. In 2003 EMCALI was taken over by the Government. Emcali’s PTAR wastewater plant has been a source of problems after construction costs rose from US$50 million to US$160 million.


MAJOR CITIES City 2000 2015 Status Bogota 6,771,000 8,970,000 Sewage treatment BOT rescinded Cali 2,233,000 3,158,000 Privatisation plans potentially revived Medellin 2,866,000 3,872,000 N/A Barranquilla 1,683,000 2,323,000 Privatisation under development Bucaramanga 937,000 1,302,000 N/A Cartagena 845,000 1,262,000 N/A Cucuta 772,000 1,080,000 Privatisation under development

A number of planned privatisations were postponed during 2000 due to political and regulatory challenges. These may be privatised at a later date. Cucuta’s EIS has a planned 30 year water concession. Expected investment in the water and sewerage networks was of around US$220 million. Quibdo (139,000 inhabitants) was to restructure a concession removing state subsidies before relaunching an auction expected in early 2000. The concessionaire was expected to invest US$21.9 million over 30 years, of which US$9.8 million would go to expand, overhaul and maintain the water supply system. In Maicao, the would-be concessionaire was expected to invest US$22.5 million over 30 year in expanding the water supply and sewerage networks and providing a new water source after 20 years of operation.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Bogota Water O&M Aguazul Bogota Santo Dominigo Water O&M Aguazul Bogota Santa Marta 20 year water and sewerage concession Tecvasa Barranquilla 17 year urban services concession Tecvasa Cartagena 25 year water and sewerage concession Agbar Monteria 20 year water provision concession Proactiva Tunja 10 year water provision concession Proactiva Private sector company operations (Please see the relevant company entry for details)


Agbar Agbar (Spain) 726,000 726,000 726,000 Tecvasa Tecvasa (Spain) 1,770,000 1,770,000 1,770,000 Proactiva FCC (Spain)/VE (France) 383,000 0 383,000 Aguazul Bogota ACEA (Italy) 3,900,000 0 3,900,000

In addition, a 20 year US$30 million water and sewerage management contract for Cordoba is expected to be awarded. ERAS (Empresa Regional de Aguas de Sinu) currently provides water services to about 25,000 residents in Sahagun, Cerete, San Carlos and Cienaga de Oro. In 2003, the World Bank has approved a US$16 million loan supporting the Bogota Urban Services Project, which aims to improve water and sewerage services, particularly for residents in low-income areas. EAAB, the municipal utility will address efficiency and service quality issues through cost reductions and support greater private sector participation in its operations. At the same time, EAAB appointed three companies to undertake service operations in five areas of the capital. Aguas Capital, Agua Azul and EPM Bogota Aguas will cover the five zones. The agreements will run for five years and are worth an estimated US$127 million in total.

CONGO PART 2: COUNTRY ANALYSIS


CONGO Since 1997, the International Red Cross has built or repaired 280 water points in the country’s rural areas, along with similar work in the cities of Pointe-Noire, Djiri, Djoué, Owando, Djambala, Dolisie, Nkayi, Madingou and Brazzaville. In total, this has improved access to drinking water for some 250,000 villagers and 1,650,000 people living in towns. Financial problems curtail service provision In the Congo, the Société Nationale des Eaux (SNDE) is having problems finding the finance needed for even the purchase of treatment products for maintaining potable water quality. Indeed, the cumulative effects of payment arrears have prevented the company from paying wages regularly. The SNDE was set up for the provision of services for urban areas, principally Brazzaville, the capital. It is regulated by the Ministry of Energy and Water, which was set up in 1984 to co-ordinate water provision policy. The government is currently seeking to find a suitable way of privatising SNDE. The wage arrears have had the effect of taking the edge off union hostility to privatisation. 50% of the urban population had direct access to safe drinking water in 1990. 63% of the population of Brazzaville has piped drinking water, but there is no sewerage network or sewage treatment for the city. In 2000, 67% of the urban population had access to safe drinking water against 72% in 1993, while the percentage had declined in rural areas from 24% to 17%. This reflects the impact of population growth even at a time when the networks were being expanded. At least 50% of urban households are still using pit latrines, while at least 30% were using septic systems. 15-20% of urban dwellers have no access to proper infrastructure, while some 70% of people living in rural areas have no sanitation whatsoever. Privatisation of SNDE Despite active interest from the three French water companies (VE, Suez, and SAUR/Bouygues), the management contract to operate SNDE was awarded to Cascal in November 2002. The contract is for the finance, refurbishment and extension of existing water treatment plants, storage facilities and distribution networks for the residents of Brazzaville, Pointe Noire, Dolisie and Oyo. It is anticipated that this will evolve into a 25 year concession contract. Source: Mott MacDonald (1992). Evaluation of the hydrology of Sub-Saharan Africa. Report on the Congo. Report prepared for the World Bank and the ADB.

COSTA RICA PART 2: COUNTRY ANALYSIS


COSTA RICA Costa Rica had a population of 4.2million in 2002, 60% living in urban areas. The Instituto Costarricense de Acueductos y Alcantarillados (AyA) is the state water authority. AyA provides potable water to 90% of the country's population. In the metropolitan area, 69% of the population with potable water also have adequate sewer systems. On a national level, 45% of the population with potable water also have adequate sewer systems. In 2003, a project sponsored in 2002 by the Inter-American Development Bank (IADB) to upgrade and manage wastewater service infrastructure in San José was cancelled. The project is now expected to be relaunched by the World Bank. It sought to scheme to expand and rehabilitate the sewerage system in a metropolitan area of San José. Under the concession approach, the project would have required an estimated US$280 million to upgrade the infrastructure and build a major WWTW with the financing provided by a mix of international institutions and commercial banks. Following a change of government in 2002, there was a change in the management of AyA, which have opponents the opportunity to derail the project. The current proposals are understood to focus on a DBO project, rather than an outright concession. Finance would come from a World Bank loan.

COTE D'IVOIRE PART 2: COUNTRY ANALYSIS


CÔTE D’IVOIRE The development of urban water and sewerage services in Côte d'Ivoire is seen as a particular success for West Africa, especially since SAUR was allowed to gain full management control of the contract. Indeed, SODECI has moved from being a financial liability to a net contributor to the nation’s economy.


Service provision Côte d'Ivoire is regarded as offering the best water and sanitation services for urban areas in Sub-Saharan Africa. Overall, 46% of the urban population receives piped water and 32% are connected to the sewerage services. However, 62% of the population of Abidjan had access to piped water in 1993, with 45% connected to sewerage services. 58% of sewage effluents collected were treated. 0.07km 3 of water was treated in 1994, with approximately 35% of all water provided for domestic and commercial use. Overall water usage rose from 0.7km3 in 1987 to 1,26km 3 in 1994. In 1998, the government estimated that it will cost CFAF266 billion to provide universal water and sewerage services for all people living in settlements of more than 3,000. Between 1996 and 1998, CFAF21 billion was spent on such projects.


SODECI Bouygues’ SAUR was awarded a lease contract to manage water provision services in Abidjan in 1959. After independence in 1960, the lease was handed over to Société de Distribution d'Eau de la Côte d'Ivoire (SODECI). SAUR in turn became SODECI’s major shareholder as it is today. In 1961, the contract was extended to five other municipalities. Shares in the company have been traded on the Bourse Regionale des Valuers Mobilieres (BRVM) in Abidjan since 1978. SAUR holds 47% of the company’s equity, with 8% being held by the government and staff, and 45% being held by private investors. The lease contract evolved to cover sewerage services. In 1987, the lease contract was converted into a full concession with an operating life of 20 years.

Urban Services Safe drinking water 59% Average water usage (L/day) 111 Access to sewerage 32% % Sewage treated 15%

From lease to concession The lease contract appears to have ensured a basic level of service, but has performed poorly in that it did not give SAUR sufficient leverage to manage the company on commercial lines. Thus the first three decades of SODECI’s life were marked by the need for government subsidies. In consequence, the World Bank supported the refinancing of SODECI on the basis that the lease contract was upgraded into a full concession so as to optimise SAUR’s management control. This was carried out as an additional part of the World Bank’s structural adjustment programme for the country. Throughout the life of the lease and concession contracts, SODECI’s scope and customer base has continued to expand. By 1973, SODECI served 40,071 customers in 38 population centres. This has expanded to 345,000 customers in 409 centres by 1997.


COTE D'IVOIRE PART 2: COUNTRY ANALYSIS


A profitable concession The assets are held by EECI, a government-held entity, with SODECI being responsible for the management of these assets. While the concession was granted in 1987, the managerial changes needed did not take place until 1990-91. In 1993, SODECI distributed 103million m 3 of water and billed 300,000 clients for 89million m3. SODECI serves approximately 70% of the country’s urban population in 370 localities and the number of connections has grown by 5-6% pa during the 1990s. The company recorded a turnover of approximately US$40 million in 1996. SODECI receives no operating subsidies from the state and self-finances all agreed capital expenditure. The company is now regarded as SAUR’s main operating entity in Africa. Since 1980, unaccounted for water has been kept below 15-17% and payment of bills has exceeded 97% for private customers. However, collecting money from government departments remains problematic. While the company’s equity remains fairly tightly held by a group of corporate, governmental and institutional interests, the company’s bonds are some of the most heavily traded instruments on the Bourse. SODECI has enjoyed a consistent reputation for paying dividends due on its financial instruments and contributing to the national budget through these dividend payments and taxation.

Groundwater Total recharge (1998, km3) 37.7 Per capita (1998, m3) 2,588

MAJOR CITIES Population 2000 2015 Status Abidjan 3,790,000 6,076,000 Privatised

By 2000, SODECI managed more than 300 piped water supply systems across the country, with the number of individual connections increasing by 5 to 6% a year. The company served 70% of the nation's 7million urban residents including 2million in Abidjan, and the rest in settlements ranging from 5,000 to 400,000 people. In order to provide services for poor people, SODECI foregoes direct hook-up charges on three out of four of its domestic connections, a policy that pays the company direct benefits, as it has a 98% percent or better collection rate from its private customers. The cost of SODECI water to consumers is no higher than in neighbouring countries with similar economic conditions, where rates rarely cover costs and service lags far behind.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Abidjan SODECI concession SAUR Afrique (Bouygues)



SODECI SAUR/Bouygues 5,200,000 3,000,000 5,200,000 Sources: Haarmeyer D. & Mody A. (1998). Worldwide Water Privatisation, Financial Times Energy, London. World Bank (1994). World Development Report 1994, Infrastructure for Development. World Bank, OUP, Oxford 1994. FAO (1996). Country database on water resources.

CROATIA PART 2: COUNTRY ANALYSIS


CROATIA The relative importance of tourism to the Croatian economy and its speedy recovery since independence from Serbia was attained has meant that Croatia has displayed a unique emphasis on developing and privatising its sewerage and sewage treatment facilities.


Management Hrvatske Vode (Croatian Waters) is the principal central government agency in charge of water resource management. Municipal entities operate on a city level, for example the Split Water and Sewerage Company (SWSC). The Law on Waters and the Law on Water Management Financing were passed in 1995. Croatia aims to bring its environmental standards into line with EU standards with the long term aim of meeting EU accession requirements. At the same time, effluent discharges to bathing waters are being treated as part of reviving the Dalmatian Coast’s tourist industry. The government seeks to raise the public water supply connection rate from 62% in 1991 and 73% by 2000 to 90% by 2005. Distribution losses were 46% in 1998 and 43% in 1999. During the 1991-92 war, 15-20% of the water system was destroyed.

Population 2002 (million) 4.4 2015 (million) 4.3 Urbanisation (2002) 59% Urbanisation (2015) 65% In urban agglomerations, 2015 26%

Implementation From 1995, the complete regulation of water resources and water managem ent in Croatia is based on the Water Act, which includes a number of sub legal acts envisaged by the Act. Under the legislative framework, administration and inspection is carried out by the State Water Directorate. The Croatian Waters company is responsible for carrying out water management activities as defined by the Water Act, in collaboration with local enterprises in various catchment areas. Croatian Waters also co-ordinate and finance realisation of the surface water quality monitoring programme which is carried out by the authorised laboratories.


Water quality and environmental spending Surface waters (rivers, lakes and artificial lakes), groundwaters and coastal sea areas are classified into four classes, depending on their utilisation and quality. Corresponding new environmental quality standards (of maximum allowable concentrations) are now under preparation. There are no emission standards or guidelines at the national level. The Directorate for Environment estimated that US$152 million was spent on environmental protection in 1995. It can also be assumed that non-environmental expenditures are included in this figure.

Freshwater Annual availability (2000) 37.7km 3 Per capita 8,429m 3 Annual withdrawal (1996) 0.8km3 Domestic (1987) 50% Industrial (1987) 50%

A sewage treatment works for Rijeka (260,000 people, including eight adjacent municipalities) was built in 1999 for €13 million, 50% coming from the EBRD. RWE is involved in the DM400 million Zagreb sewage treatment project serving 1.5million people. The financing of this work has involved mobilising DM150 million of project finance and DM250 million from multilateral loans and sponsor finance. Construction started at the end of 1999.

Groundwater Annual availability (1998) 11km 3 Per capita 2,459m 3

CROATIA PART 2: COUNTRY ANALYSIS


In 1998, funding was arranged for treating effluent outflows into Kastela and Trogir Bays. The work consists of constructing two sewage treatment works and two submarine outfalls, along with a water supply rehabilitation and replacement scheme for the mains and pumping stations, along with the construction of a new main pipeline. The total project cost is estimated at DM260 million (US$145 million), with the IBRD providing DM65 million (25% of the total project cost), and the EBRD providing DM74 million, along with local financing of about DM121 million. The latter is being provided by the four participating municipalities (Split, Solin, Kastela and Trogir) and SWSC (DM21 million) along with grants from the central government worth DM100 million. MAJOR CITIES City 2000 2015 Comments Zagreb 1,067,000 1,183,000 Sewage treatment facility project started KfW, on behalf of the German Government, is to support a project with Aquamundo for upgrading wastewater discharges into the Adriatic Sea. This is designed to help restore tourism. The coast has 150,000 permanent inhabitants and some 250,000 summer visitors. KfW made a grant of €37.5 million for this project in 2003.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Zagreb BOT sewage treatment ZOV



ZOV RWE (Germany)/EVN (Austria) 0 750,000 750,000

CUBA PART 2: COUNTRY ANALYSIS


CUBA Aguas de Barcelona has progressively developed its involvement with Cuba to the point where it is set to play an important role in finding the basis for a long-term revival of the island’s economy.

Population 2002 (million) 11.3 2015 (million) 11.5 Urbanisation in 2002 76% Urbanisation by 2015 78% In urban agglomerations , 2015 20%

Water and sewerage services In 1996, piped water was provided to 97.9% of the urban population and 75% of the rural population. The 2000 target was for 99.9% coverage for urban areas and 100% coverage for rural areas. Sewerage covered 94.6% of the urban population and 78.2% of the rural population in 1996. Coverage targets for 2000 are 99.9% and 98.9% respectively. 22% of urban sewage effluents are treated at five secondary sewage treatment works.


Capital spending plans In 1996, the government announced that it was aiming for the treatment of all urban sewage effluents over the next ten years at a total cost of US$643 million for rehabilitating the extant sewerage system and sewage treatment works, plus a further US$747 million for service extension. Total capex needs for water provision are estimated at US$1.5 billion.


MAJOR CITIES City 2000 2015 Status Havana 2,256,000 2,365,000 Agbar

Urban water and sewerage

1981 Piped water Indoors Sanitation Flush Havana 100% 90% 98% 97% Santiago de Cuba 96% 76% 97% 62% Camaguey 88% 63% 97% 57% Holguin 64% 40% 92% 37%

Groundwater Annual availability (1998) 8.0km3 Per capita 720m 3 Annual withdrawal (1975) 3.8km3

Agbar and privatising Havana’s services Agbar’s Interagua formed a JV with the Cuban Government in 1999 for two water management contracts serving 525,000 people. Aguas de La Havana will be 50% owned by Cuba's INRH. The contracts serve Havana, the capital, and the resorts of Cayo Coco and Varadero. The project has a 25 year contract life and is being supported by a US$24.7 million loan by Agbar. The contract was expanded in 2000 to cover 1.3million people in Havana via a 25 year management contract. In total, 1.8million people will be served by these contracts.

CZECH REPUBLIC PART 2: COUNTRY ANALYSIS


CZECH REPUBLIC Privatisation has been carried out in a systematic manner in the Czech Republic. When Prague Water was privatised earlier this year, effectively all urban water and sewerage services became nominally under private sector management. The fact that a significant proportion of the shares of these private sector entities remain in municipal hands underlines the point that a full range of institutional and international investors are needed as well as companies for sale.


Sewerage development Connection to the sewage network has increased from 38% to 48% between 1980 and 1992. The number of operational wastewater treatment plants rose from 620 in 1989 to 960 by 1999. 75% of the population was connected to the sewerage network in 2000, with the aim of increasing this to 80% by 2005. Before 1990, sewerage technology in the then Czechoslovakia was well regarded, when given the money to operate to its intended standards. In 1990 a Kc3.75 billion sewage treatment works was completed, one of Europe's largest at the time. Here, the effluent discharges were found to be cleaner than the river water.

Sewerage and treatment 1991 1999 Tertiary treatment 0% N/A Secondary treatment 46% 65% Primary treatment 2% N/A Sewerage only 24% 10% Not connected 28% 25%

In addition, 60% of industrial effluents are inadequately treated. The total amount of effluents discharged in the period 1992-95 decreased by more than 13%, with the amount of treatment taking place increasing by 8%. This in part reflects investments in new and upgraded sewage treatment plants during 1993-1995. The total amount of BOD discharged into rivers decreased by 40% between 1990 and 1996.


Water quality In 1990-92, the majority of rivers were understood to be of III/IV class. Across the country, at least 50% of all rivers are in a 'bad' or 'very bad' condition. These rivers can be regarded as biologically dead and a significant proportion of these waters cannot be used for industrial processes even after treatment. On average, there are 60 cases per annum of groundwater pollution from oil and petrol storage leaks, and 50 per annum from agricultural effluents. The aquifers along the Rivers Elbe and Moravia have had increasing levels of nitrate contamination from agriculture. Since 1993, an improvement in groundwater quality has been noticed. Nevertheless, some 60% of surface and ground waters were identified as unfit for human use in 1995. The quality of drinking water withdrawn from the surface waters has remained poor. As a result, bottled water consumption is widespread, although costly. The quality of drinking water is assessed in accordance with the WHO Guidelines for Drinking Water Quality. According to US trade officials in 1995, only 18% of the population’s drinking water meets the WHO criteria. Distribution losses of up to 40% have been identified in major towns and cities. Connection rates in urban areas have increased from 82% in 1999 to 87% by 2002. Water lost through leakage accounted for 23.8% of distributed water in 2002, compared to 25.1% in 2001. The Prague water and sewage company cut leakage rates from 44% of distributed water in 1989 to 30% in 2003 and seeks to cut leakage to 19% by the year 2013.

Urban Services Safe drinking water 87% Access to sewerage 70% % Sewage treated 60%



The economics of water and sewerage The Czech Government has been strongly in favour of privatisation since 1993, and with the sale of Prague Water in 2001, the initial privatisation of water and sewerage services is complete. Since the end of communism in 1989, water consumption has been cut by nearly half, primarily as a result of a 40-fold price rise. Consumption is also down because of the decline of the country’s heavy industry. In 1989, average consumption was 300Lper person per day, declining to 163L in 2002. The cost of a cubic metre of drinking water was kc19.5 (€0.62) in 2002, while the collection of a cubic metre of sewage cost kc15.9. EU compliance related work on the sewerage network and industrial effluent treatment was estimated at €2.47 billion in 2004, with 600 WWTWs needing to be built or upgraded, so as to provide EU compliant sewage treatment for all cities and towns with more than 2,000 inhabitants by 2100.


Privatising water and sewerage services Since 1993, 57 water and sewerage companies have been set up, subdivided from the original eight regional entities and Prague Water. With the exception of the latter, shares were offered for alI of these entities, although in a number of cases, effective control of the operating companies has remained in municipal hands through the acquisition of shareholdings. With the exception of North Moravia’s SMVAK, the asset owning company is held by the relevant municipalities and the government, which rents the infrastructure and approves water charges to the privatised operating company via a contract, which includes the agreed price formula. Nine of these companies, serving more than 3.85million people have been fully privatised, with foreign investors involved. The agriculture ministry is seeking to advise municipalities on utility sales, amid concerns that water and sewage works could be sold too cheaply or too quickly. It also intends to use its so-called golden shares in the water utilities yet to be privatised in order to block what it sees as unsuitable sales. The plan is that the commission would monitor the situation and then would oversee sales until the year 2010. Around 40 concerns remaining in local authority hands. The ministry has already used their golden share to so far block the sale of Vodovody and Kanalizace Zlin in south Moravia to foreign investors, while a similar scenario is set to follow for Vodarny Kladno-Melnik in central Bohemia.

MAJOR CITIES Population 2000 2015 Status Prague 1,203,000 1,203,000 Prague Water privatised

Privatisation of Prague Water The concession for Prague's water supply companies (Prazske Vodarny) and sewerage service companies (Prazsje Kanalizace a Vodni Toky) was awarded to AWG and VE in early 2001 after the two companies joined forces (a 66% share sale for Kc 6.1 billion (US$163 million), with a 15 year operating contract, with the balance of the shares being held by the city.) The contract supplies 1.16million people in Prague and a further 0.2million in central and eastern Bohemia via the sale of bulk water supplies. Revenues in 2003 were €132 million, with improved domestic consumption, price increases and reduced system losses accounting for a 7% increase in revenues over 2002.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Prague Water & sewerage concession PVK South Bohemia Water & sewerage BOT VAK Jizny Cechy North Moravia Water & sewerage concession Severomoravske VAK (SMVAK) Pilsen Water & sewerage concession VAK Pilzen South Moravia Water & sewerage concession Suez Ceske Water & sewerage concession 1.JVS Beroun Water & sewerage concession S Berounske Vodovy Olomouc Water services CTSE Brno Water & sewerage concession Brnenske VAK Ostrava Water & sewerage concession Ostravske VAK Karlovy Vary Water & sewerage concession VAK Karlovy Vary Sokolov Water & sewerage concession VAK Sokolov (CTSE) Northern Bohemia Water & sewerage concession Severomoravske VAK Ostrava



Private sector contracts awarded (Please see the relevant company entry for details) Nymburk Water & sewerage concession VAK Nymburk Prerov Water & sewerage concession VAK Prerov Vsetin Water & sewerage concession VAK Vsetin Chrudim Water & sewerage concession VAK Chrudim Cheb Water & sewerage concession Chevak Cheb Hradec Kralove Water & sewerage concession VAK Hradec Kralove Havlickuv Brod Water & sewerage concession VAK Havlickuv Brod Chocen Water & sewerage concession VAK Jablonne and Orlici Breclav Water & sewerage concession VAK Breclav Kromeriz Water & sewerage concession VAK Kromeriz Uherske Hradiste Water & sewerage concession Slovacke VAK Hodonin Water & sewerage concession VAK Hodonin Zlin Water & sewerage concession VAK Zlin Vyskov Water & sewerage concession VAK Vyskov Sumperk Water & sewerage concession SPVS

23 corporate entities have been identified. AWG, Suez and VE as outlined below operate 16 of these companies. It is understood that in most of the other cases, the municipalities have retained at least a strategic stake in the operating companies, with the national privatisation fund also being a major investor.


(country) Water Sewerage Total PVK VE (France) 1,200,000 1,200,000 1,200,000 VAK Jizni Cechy Elektrim (Austria) 330,000 330,000 330,000 S Berounske Vodovy Elektrim (Austria) 100,000 100,000 100,000 SMVAK Penta Finance (Czech) 750,000 750,000 750,000 Ostravske VAK Suez (France) 330,000 330,000 330,000 Brenske VAK Suez (France) 420,000 420,000 420,000 VAK Karlovy Vary Suez (France) 120,000 120,000 120,000 South Moravia Suez (France) 350,000 350,000 350,000 Horny Slovak Suez (France) 9,000 9,000 9,000 SVAK Ostrava VE (France) 1,070,000 875,000 1,070,000 1.JVS VE (France) 180,000 180,000 180,000 CTSE VE (France) 130,000 0 130,000 VAK Zlin VE (France) 160,000 160,000 160,000 VAK Pilsen CTSE (VE, France) 252,000 252,000 252,000 VAK Sokolov CTSE (VE, France) 130,000 130,000 130,000 Vodosopol Klatovy CTSE (VE, France) 50,000 50,000 50,000 Aqua Pibram CTSE (VE, France) 75,000 75,000 75,000 Susice, Stary & Stod CTSE (VE, France) 26,000 26,000 26,000 SVPS Suez (France) 120,000 120,000 120,000 Benesov Suez (France) 38,000 38,000 38,000 Dalve Suez (France) 37,000 37,000 37,000 Chevak Cheb Gelsenwasser (Germany) 96,800 96,800 96,800

DENMARK PART 2: COUNTRY ANALYSIS


DENMARK Water policy and provision Water policy is framed by the Water Supply Act of 1978 (amended 1997) and the Environmental Protection Act (amended 1997). Water pricing policy is designed to ensure that the total revenue from water charges does not exceed total costs, including appropriation for future investments. Almost all costs are recovered through water charges. In 1994, an environment tax on drinking water for household use was introduced in order to encourage conservation. A tax on wastewater for discharges of nitrogen, phosphorous and organic substances entered into force in 1997. All urban and rural households have access to safe water provision and sewerage services, with 90% of the population connected to piped water services. 99% of the Danish drinking water is extracted from underground supplies. National policy emphasises the maintenance of the quality of water resources rather than post priori water treatment. Water is obtained via 30 year water extraction permits. There are 540 municipalities, served by 120 water provision entities. 90% of water works are run privately, while the remainder are run by the municipalities. The public water works supply two-thirds of the population. The local private water provision service companies cover 25% of the population, with a further 10% of the population being effectively self served, although they are usually connected to the municipal sewerage network. Notwithstanding the exception below, there appears to be no particular desire to see the privatisation of larger water and sewerage networks in the foreseeable future. Water supplies cost €382 million in 2000, along wih €680 million for sewerage and sewage treatment. Sewerage and sewage treatment A survey in 1995 identified a spend of Dkr100 billion (£11.6 billion) on water provision and sewerage compliance work for 1995-2020. Many of the targets implied by the survey would appear to seek to use EU criteria as bare minima. Domestic sewage treatment

1985 1990 1998 Tertiary treatment 4.2% 29.1% 84.0% Secondary treatment 58.3% 42.1% 3.4% Primary treatment 16.1% 14.2% 1.6% Sewerage only 9.5% 1.6% 0.1% Not connected 11.9% 13.0% 10.9%

The proportion of the population connected to sewerage services increased from 91% in 1980 to 98% in 1990, with the proportion of sewage being treated rising from 53% to 98% during this period, while primary treatment fell from 32% to 8%. There were 1,805 sewage treatment works in 1988, of which 18 serve cities with a population in excess of 100,000. The total capacity for treating and recycling waste water is 8.3million PE, with 100% of urban sewage treated. The current emphasis is to upgrade extant facilities to tertiary treatment standard wherever it is seen as appropriate.

Inland water quality (1989-91) I Good 4% II Fair 49% III Poor 35% IV Bad 12%

In 1990, the municipality of Farum undertook a sale and lease-back of its wastewater treatment plant. No further PSP has been identified.


Water Sewerage Total Krüger VE (France) 0 60,000 60,000

ECUADOR PART 2: COUNTRY ANALYSIS


ECUADOR Attention has focussed on the relative lack of developments in Quito, Ecuador. Consequently the Guayaquil concession award came as a bit of a surprise. This is the country’s main industrial city and international finance has supported the process.


International support In 1999, the Municipal Water and Wastewater Company of Quito started a US$170 million service provision upgrade project to provide improved water and sewerage for 600,000 people. The work is being supported by a loan from the IADB. The IADB is also providing US$41 million out of US$51 million being spent on water and sewerage rehabilitation work in Guayaquil by Ecapag.


A tradition of municipalities operating as autonomous entities has in turn held back the regulation required to drive forward investment. Attempts since 1996 to create a national water regulator have been thwarted. Water losses are 40-50% and in one case 70% or even higher, including illegal connections. Due to local political pressure municipal utilities are unwilling to increase rates to replace pipes.


Freshwater Annual availability (1998) 442km 3 Per capita 34,950m 3 Annual withdrawal (1985) 15km 3 Domestic (1987) 12% Industrial (1987) 6% Agriculture (1987) 70%

The Guayaquil concession A 30 year concession for water and sewerage services for the city of Guayaquil (1.72million people in 1995) was gained by International Water, against Thames Water (RWE) and Suez. Water provision by Empresa Cantonal de Agua Potable y Alcantrillado de Guayaquil (Ecapag) will rise from 70% to 90% by 2020, with sewerage coverage increasing from 50% to 90%. Although the privatisation of Quito’s services (1.24million people in 1995) has been considered on an informal basis in recent years, political constraints remain an obstacle.


Service provision in the main cities

Piped water Indoors Sanitation Flush Quito 85% 70% 97% 93% Guayaquil 61% 41% 95% 42% Cuenca 96% 86% 95% 93% Machala 63% 42% 92% 76%

MAJOR CITIES City 2000 2015 Comments Guayaquil 2,118,000 3,397,000 Water & wastewater privatised Quito 1,616,000 2,228,000 PSP under consideration

ECUADOR PART 2: COUNTRY ANALYSIS


Overall, 68% of the urban population in 1999 was considered to have access to safe drinking water and 48% to have adequate sanitation. It is of interest to note that the connection to indoors taps and lavatories in many medium sized towns is higher than in Quito or Guayaquil. Some 5% of Quito’s sewage effluents are subject to treatment. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Samborondón Water & sewerage services Tecvasa Guayaquil Water & wastewater concession ECAPAG Empresa Metropolitana de Alcantarillado y Agua Potable (Emaap), Qito's water utility intends to award a US$600 million 20 year water and power BOT, to supply the city with water and power via a 109km water channel from the Valle Vicoso river to its Bellavista water treatment plant. The population of Qito is forecast to double by 2020. The Inter-American Development Bank approved a US$40 million loan to Emaap in September 2002 to support the first phase of a US$110 million programme to expand water and sanitation services and reduce flooding and landslides. This will enable Emaap to extend water and sewerage service to low-income sectors of the population. Manta (Manabi Province) is seeking to privatise Eapam, its water utility, which serves 200,000 people. Guayas and Pinchincha Provinces are also examining PSP options. Private sector company operations (Please see the relevant company entry for details)


Tecvasa Tecvasa 100,000 100,000 100,000 ECAPAG UU (UK) 2,500,000 2,500,000 2,500,000

EGYPT PART 2: COUNTRY ANALYSIS


EGYPT Egypt retains an unhealthy dependence on the Nile River, even though both the quality of this resource has been degraded and upstream users are becoming increasingly thirsty. In recent years, the emphasis has shifted from irrigation projects to improving irrigation efficiency and water re-use. Having been traditionally dependent on international support for projects, the private sector is now being encouraged to participate. A lower then expected growth in the demand for industrial water is slowing this process down.


Water scarcity is endemic Egypt is characterised by limited land and water resources. Less than 3% of its area is cultivated because of water shortage. The Nile is already fully utilised, mainly for agricultural and human use. Water quality problems are mainly salinisation and waterlogging as a result of the over-exploitation of the Nile. These problems affect the productivity of cultivated land, while aquifers have rising salt levels and pollution ingress. WHO statistics point to about 90,000 annual recorded deaths linked to water-borne diseases. Quantities of direct or indirect liquid wastes, from industrial sources into the River Nile are estimated at 2.4 million m3 per day. The share of Greater Cairo and Alexandria’s pollution load is about 17% and 11% respectively. While Egypt’s theoretical sewage and effluent treatment capacity is 7.18million m 3 per day, 1.73million m3 of effluents per day are discharged to the Mediterranean and Lake Manzala from Alexandria, Damietta and Port Said. There is a plan to reuse water from Alexandria’s wastewater treatment facility (capacity of 1.54million m3 per day) to reclaim the strip of northern coast. Population 2003 (million) 70.5 2015 (million) 90.0 Urbanisation in 2002 42% Urbanisation by 2015 45% In urban agglomerations, 2015 24%

Infrastructure development costs

Since 1983, £30 billion has been invested in service improvement. Potable water reached 90% of the population in 2002. During this time, 1900 water treatment works were built, handling 18million m3 per day and wastewater treatment capacity was expanded from 1.0million m3 per day to 8.2million m3 per day through the construction of 220 WWTWs. Revenues only cover 40% of costs because of subsidies, inefficiency, high levels of leakage, and non-paying state customers. The Ministry of Public Works and the Ministry of Housing and Public Utilities have allocated £3.5 billion (along with an €90 million loan from the EIB) for the Greater Cairo Wastewater programme. This involves an extension of the sewerage network, 20 new water and wastewater treatment works and remedial work to alleviate water source pollution.


Aid related funding has been the norm

USAID has been the largest single donor in Egypt for urban water pollution treatment equipment projects in Cairo, Alexandria and other medium -sized cities. Since 1975, USAID has invested over US$2 billion in urban water and wastewater infrastructure serving about 22million people. More than US$900 million of this money has been focussed on sewerage and sewage treatment in Cairo. Projects seek to treat raw sewage and improve water and wastewater systems of several cities. Recent projects have included connecting 700,000 residents in poor Cairo and Embaba to the sewerage network, along with more than 500,000 residents in Suez. In Cairo, three potable water reservoirs serving the city at Darassa entered service providing water to 3million people. This funding programme continues, with US$45m in aid to improve sewage treatment in the southern city of Luxor being announced in March 1999.



Freshwater Annual availability (1998) 2.80km 3 Per capita 43m 3 Annual withdrawal (1993) 55.1km 3 Domestic (1993) 6% Industrial (1993) 8% Agriculture (1993) 86%

Environmental legislation Egypt appointed a council for environmental protection with the legal power to assess fines for violators of pollution laws in 1996. This reflects the government's focus on water protection since the passing of an environmental protection law in January 1994. The law requires that existing industrial concerns equip their facilities with water pollution treatment equipment and all new tourist and industrial developments have to order suitable water and effluent treatment plant as part of the planning process. Measures implementing the regulations of the new environmental law went into effect in February of 1995. A National Water Policy has set out targets for 2017. These concentrate on improving the efficiency of the irrigation systems and increasing the amount of treated wastewater used for irrigation. Private sector participation encouraged Egypt authorised the creation of financially autonomous utilities in 1995. The legislation allows commercial approaches to delivering public water and wastewater services, giving utilities the ability to levy and retain tariffs and generate revenue on a cost recovery basis. Tariff collection rates have increased in Cairo and Alexandria and separate bank accounts were established which give these utilities a degree of flexibility in planning their operations. Utilities in both Cairo and Alexandria are being encouraged to make more progress in increasing the level of tariffs towards cost recovery. In smaller urban areas, tariff reform is well advanced. In 2000, a law on the ‘grant of concessions for establishment, management and utilisation of water/wastewater utilities’ was passed. This allows for the granting of concessions for up to 99 years to private sector companies. An intermunicipal policy co-ordinating committee was established to act as a regulator for the water and wastewater sector, with the specific aim of encouraging management efficiency, cost recovery and private sector participation.

Groundwater Annual availability (1998) 1.3km3 Per capita 20m 3 Annual withdrawal (1985) 3.0km3

Privatisation prospects The first major private sector operated facility was to be for developing industrial water provision in the Suez Special Economic Zone (SEZ). In 2001, a US$180 million 33 year water treatment BOT contract was awarded to Canada’s SNC Lavalin. In 2002, the contract was suspended. The BOT plans for water provision for the resort city of Sharm El Sheikh have also been postponed. Bechtel has been asked to develop a series of proposals for Independent Water and Power Projects (IWPPs) in the Sinai. A private sector managed system supplies water to most of the hotels in the city's Naama Bay area, and a private wastewater treatment facility is being built that will also supply treated water for reuse. In Nuweiba, private companies maintain the city's water and wastewater system. In the longer term, pressures for new investment through PPP are likely to return. Along with Suez, the Port Said industrial zone is the most likely candidate for a BOT, along with the tourist resorts.

MAJOR CITIES City 2000 2015 Status Alexandria 3,506,000 4,330,000 N/A Cairo 9,462,000 11,531,000 N/A Shubra El Khema 937,000 1,234,000 N/A

Conflict Study: The Nile River Basin The 10 countries within the Nile basin contain 40% of Africa's population and make up 10% percent of its land mass. These countries are: Egypt, Sudan, Burundi, the Democratic Republic of the Congo, Eritrea, Ethiopia, Kenya, Rwanda, Tanzania and Uganda. More than 85% of the Nile's water comes from the Blue Nile, which originates in Ethiopia. However, most of the river's flow of 85billion m3 pa is used by Egypt, the last nation on the Nile's path to the Mediterranean Sea. In 1959, a pact was drawn up dividing most of the Nile’s waters between Egypt and Sudan. Earlier agreements include those drawn up on behalf of Nile Basin countries between various European Empires.



The Nile effectively provides Egypt with its fresh water. In recent years, the upstream nations have started to harness the Nile's waters in response to economic development and population growth. In Ethiopia, more than 200 irrigation dams have been built during the 1990s, that will use nearly 500million m3 of the Nile's flow annually, while further dams are being planned for hydropower. If Ethiopia sought to develop half of its irrigation potential, this would reduce the river's flow to Egypt by 15%. The basin does not produce enough fresh water to satisfy the irrigation plans of both Ethiopia and Egypt. Egypt’s New Valley irrigation project is based on relocating seven million people who will be supplied with 5billion m3 pa of water from the Lake Nasser reservoir. Sudan plans to build its own dam on the Nile north of Khartoum, where the Blue Nile and the White Nile converge. After threats by Egypt to go to war over its water resources, diplomacy has been replacing rhetoric. All ten countries have signed the UN’s 1997 transboundary waters convention. The U.S. State Department and Environmental Protection Agency have opened field offices to help developing nations negotiate transboundary solutions to regional environmental problems including freshwater scarcity. The Eastern Africa hub, which specialises in Nile Basin water resource issues, opened in Addis Ababa in 1998. With the region’s population rising from 140million in 1980 to 340million by 2025, longer term resolutions depend on population stabilisation. In May 1999, water ministers from the ten Nile Basin states agreed to co-operate on the equitable use of the Nile water resources and to strengthen the Nile secretariat head office in Entebbe, Uganda. At a meeting in Khartoum in August 2000, officials agreed to plans for the redistribution of the Nile waters, including power sharing cooperatives, river regulation and water resources management. Egypt is said to have agreed to cancel its monopoly of the waters under the 1959 treaty and has agreed to improve relations with Ethiopia and Sudan. Even so, Kenya’s notice of intent to withdraw from the treaty in 2003 has been described by Egypt as “an act of war”. In June 2001, the first meeting of the International Consortium for Cooperation on the Nile (ICCON) took place, when the donor community pledged US$140 million to support various programmes. Source: GWI (2002). Egypt gripped by wave of pessimism. Global Water Intelligence, Volume 3, Number 9, p 5.

ESTONIA PART 2: COUNTRY ANALYSIS


ESTONIA The Tallinn privatisation process has attracted attention due to concerns about where the actual control of the concession lies. This depends upon how you interpret the potential development of the company’s share structure. UU has taken the optimistic view; which Suez did not share, despite Suez being responsible for the original EBRD funded work.


Drinking water Distribution losses are mainly in the region of 30-35%, rising to up to 60% in Northeast Estonia. There are 23 water treatment plants in Estonia, most of which are regarded as outdated and are being upgraded. The Tallinn and Kuressaare water treatment works have been reconstructed since 1991 and are regarded as performing satisfactorily. 20.2% of drinking water samples failed on chemical criteria and 7.4% on bacterial levels in 2000.

Population 2002 (million) 1.3 2015 (million) 1.2 Urbanisation (2002) 69% Urbanisation (2015) 71% In urban agglomerations, 2015 0%

Urban Data Served by piped water 95% Access to sewerage 93% With sewage treatment c75%

Sewerage services There are some 620 secondary treatment plants, 240 of them requiring extensive overhaul. In addition, there are 10 tertiary sewage treatment works. In the late 1980s, there were 1,080 treatment plants, but many fell into disuse with the break up of communal farming and a population shift towards urban areas. There are 130 direct outlets of wastewater into the sea, 30 into lakes, 1013 into rivers, and seven into groundwater. In 1996, 1% (1.6million m3 pa) of primary treated wastewater (total 138million m³ pa) was poorly treated. This is mainly drainage water from the mining industry. 4% (3.4million m 3 pa) of water subject to secondary treatment (85million m³ pa in total) was just treated by settlement in sewage lagoons, while 27% was regarded as being poorly treated.

Freshwater Annual availability (2000) 12.7km 3 Per capita 9,105m 3 Annual withdrawal (1985) 0.2km3 Domestic (1987) 56% Industrial (1987) 39% Agriculture (1987) 5%

Municipal wastewater

1999 Total discharge (million M³) 282 Connected to sewerage 70% No treatment 1% Primary 1% Secondary 32% Tertiary 69%

Groundwater

Annual availability (2000) 4.0km3 Per capita 2,865m3

ESTONIA PART 2: COUNTRY ANALYSIS


Investments Between 1990 and 1995, investment was concentrated on wastewater treatment plants situated close to the coast of the Baltic Sea. In the investment programmes for 1996, the emphasis was moved to saving the use of water through efficiency gains and leakage reduction, while concentrating on inland sewage treatment plants. KR235 million was invested in water protection in 1996 from the Estonian Environmental Fund and other sources, which covered more than 50 projects. The government is using water pricing as a policy to encourage efficient use by domestic and industrial users. This work was supported with a €10 million loan from the EBRD. The Ministry of the Environment believes that compliance with the EU’s urban wastewater treatment directive will cost €350 million by 2008, involving 90 individual projects for towns with a PE in excess of 10,000. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Tallinn 30 year water & wastewater concession AS Tallina Vesi Privatisation The municipality of Tallinn sold a 50.4% holding in Tallinna Vesi (Tallinn Water) via 28million shares currently held and 30million new shares (for a minimum) to UU and Bechtel in October 2000. Suez, VE and International Water have pre-qualified for bidding. International Water and United Utilities bought the stake in Tallinna Vesi for KR 1.3 billion (US$78.22 million). In 1994, the EBRD provided €23 million out of a €48 million loan package for the construction of a sewage treatment works in Tallinn, which was constructed by Degrémont (Suez). Under the sales agreement, tariffs at Tallinna Vesi will be frozen until a 15% increase in 2004-2005. The EBRD and DEPFA Investment Bank Ltd syndicated an €80 million loan to Tallinna Vesi to a group of western European banks in March 2003. The loan will help Tallinna Vesi meet EU standards for water and wastewater services. Private sector company operations (Please see the relevant company entry for details)


AS Tallina Vesi UU (UK) 405,000 405,000 405,000

ETHIOPIA PART 2: COUNTRY ANALYSIS


ETHIOPIA In 2002, the Ethiopian Water Resources Ministry announced that the country will undertake a 15-year water sector development programme with a total investment of some US$8.6 billion. Funding is to be secured from the government and donor organisations and the programme will focus on hydropower generation, safe drinking water provisions, irrigation schemes construction and capacity building. Some 629 safe drinking water schemes and 110 town sewerage systems will be constructed. Access to safe drinking water was 24%, in 1998 against 19% in 1990. Sources of safe drinking water were: protected wells; 10%, piped networks with standpipes & public taps; 11% and piped networks with private taps; 3%. In 1990, access to safe water in rural areas was 11% against 80% in urban areas. 83.5% of the urban population had access to safe drinking water in 1998. In Addis Ababa, extensions of the water and power networks, originally established during the Italian Occupation, supply 92% of homes with water. Between 1997 and 2001, the regional council sought to provide access to piped water for another 331,000 residents. Actual progress was significantly below this figure. In 2001, the Addis Ababa Water and Sewerage Authority (AAWSA) came into operation. The authority’s initial aim is to develop a billing system based upon cost recovery and affordability. This is being implemented by CS Holdings of South Africa, who have developed a tariff structure that is being progressively implemented over the next five years. A contract to modernise revenue collection and computerize billing became operational in 2001. By 2002, the contract had paid for itself. The existing tariffs and collection rates were too low to finance operations. To rationalize billing, the bi-monthly billing cycle was replaced by a monthly system, while a new tariff structure is being phased in over a five-year period. Full cost recovery will be introduced for water and sewerage services from 2006. The educational programme, linking the water conservation and the importance of paying bills has assisted this process. It was the first time that the authority had attempted any form of PR. In 2004, the World Bank approved a US$100 million loan to encourage the reform and extension of urban and rural water supply projects. This will mobilize 5,500 local projects designed to bring potable water supplies to 3million people.

FINLAND PART 2: COUNTRY ANALYSIS


FINLAND Management of water resources The Finnish Ministry of the Environment is currently preparing long-term goals for the protection of Finnish waters for the year 2005. These will be based on the Water Act (1961, revised in 1996), the Act on Environmental Administration (1995), and the Act on Public Water and Sewage Plants (1977, revised 1994). Annual withdrawals of ground and surface waters as a percentage of available water were 2.3% in 1994. Domestic consumption of water was 257l per capita per day in 1995. Water supplies 86% of the Finnish population was served by public waterworks in 1994 and approximately 80% was connected to public sewerage systems in 1999.

Domestic sewage treatment 1990 1999 Tertiary treatment 76.0% 80.0% Secondary treatment 0.1% 0.0% Primary treatment 0.0% 0.0% None 23.9% 20.0%

Officially, 99% of urban and 90% of rural households have access to safe water provision and all households have safe sewerage services. In 1983, there were 794 public water supply plants serving 3.79million people. Most industrial plants are served by their own water supplies. Effluent treatment coverage was 93% in 1995, with 600 municipal and 150 industrial wastewater treatment plants in 2002, with an annual operating cost of €200 million. The quality of Finnish wastewater treatment is regarded as being good. However, there is still need to improve biological and chemical treatment with regards to phosphorus removal from effluents. Industry generated 900million m³ of wastewater, of which 700million m3 were generated in the pulp and paper industry in 1994. 79% of the wastewater of pulp and paper industries are subject secondary treatment, with 11% receiving tertiary treatment and the remaining 12% being treated at primary level. Financing water and sewerage services The municipal wastewater and water supply investment costs are financed mainly by municipalities themselves, and operation and maintenance costs including capital costs are mainly covered by the users in compliance with the polluter pays principle. The current investment costs of public water and sanitation services are about mk1.8 billion per year (US$340 million pa). Finnish industry spent mk336 million on water and wastewater projects in 1997, along with O&M costs of mk874 million. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Haapavesi Wastewater treatment concession Kemwater In 2002, Kemwater Services (51% Kemira OY and 49% YIT Environmental Services, owned by the Helsinki municipality) gained a 12 year concession to operate the second largest wastewater treatment plant in northern Finland. €2 million will be spent in upgrading the facility. Private sector company operations (Please see the relevant company entry for details)


Kemwater Kemira (Finland) 0 60,000 60,000

FRANCE PART 2: COUNTRY ANALYSIS


FRANCE The French water sector remains a fine example of a Cartesian duality. Across the world, Veolia, Suez and Bouygues are pioneers and leaders in the development of private sector participation. Yet at home, privatisation has advanced at a stately pace, inheriting a somewhat primitive infrastructure by European standards and existing in a cosy and, until recently, non-competitive environment. While the French market is unlikely ever to open to international competition, companies are now being expected to deliver in terms of performance and helping France to modernise its water and sewerage services and local competitors are emerging.


Households pay 84% of water fees, compared with 1% by farmers and 15% by industry.

Population Total 2002, million 59.8 Total 2015, million 62.8 Urban areas (2002) 76% Urban areas (2015) 79% In urban agglomerations 2015 20%

Water quality River water quality in 1985 I-Good/Very Good 8% II-Fair/Good 26% III-Poor/Fair 60% IV-Bad/Poor 6%

Sewerage and sewage treatment

Year 1993-1995 2000 Tertiary 5% 13% Secondary 44% 61% Primary 5% 13% Sewerage only 14% 6% Not connected 32% 7%

The connection rate for sewerage services has increased from 55% in 1970 to 61% in 1980 and 93% by 2000. The percentage of the population having their sewage effluents treated has increased from 19% in 1970 to 41% in 1980 and 87.5% by 2000. Lead pipes were still being installed in Paris as late as 1992. Lead piping was banned in 1995 and lead solder in 1996. In consequence, replacement of up to 70% of piping in some areas will cost a total of F120 billion. A survey carried out in 1999 found that in France, 10% of water samples were over the current lead standard, let alone the standard being proposed by the WHO and the EU. According to 2004 report of the Institut Français de l’Environnement, 21% of groundwater and 45% of surface water has excessive pesticide levels and 30% of inland water is of poor or bad quality. Water usage and availability Demand for water has risen by 4-5% pa since 1950, and had stabilised by 1990. Since 1991, domestic water consumption has been decreasing by 1% per annum. Since 1994, water bills are calculated according to the volume of water used, while metering has been compulsory since the 1930s. The shift towards demand led pricing has been a key factor in constraining domestic water use. 14.42million people live in areas with a water shortfall, mainly in Côte d’Azur and the Ile de France.

Urban services % Water 99% L per capita per day 156 % Sewerage 95% % Sewage treated 80%



Compliance costs According to Suez, compliance with the proposed Drinking Water Directive will cost France F100-120billion, with affected households paying F10-50,000 to replace their lead piping. The company stopped using lead piping for connecting households with the mains in 1981 and even then, it was the exception. The Paris region plans spending US$6 - 7 billion on wastewater treatment from 1997 to 2015.

Water billings in 2001 were €10 billion: Local authority collection 46% Private sector collection 25% Water agencies 12% Government 7%

Sewerage infrastructure development

Year 1992 2000 2005 (forecast) Sewerage 65% 75% 85% 2o/3o treatment 50% 70% 80%

One of the problems is that the ‘polluter pays’ principle applies more to domestic customers than to other categories. In 1998, agriculture generated a BOD load of 254million PE while financing 2% of sewerage expenditure and accounted for 80% of water demand while paying 1% of the national supply bill. The Agences des Basins are failing to levy appropriate charges to agriculture and industry. As a result, they have been steadily increasing their fees to domestic customers (up 22.7% pa on average between 1988 and 1994) to make up for this shortfall. Market structure Companies have a portfolio of local contracts, traditionally managed on a regional basis. Privatisation has been taking place alongside the evolution and expansion of water and wastewater services. Since the late 1930s, privatisation has generally expanded by 1% per annum. There are three leading private sector companies with 13,000 contracts, and the public sector, which addresses some 23,000 municipal contracts. The private sector accounts for 78% of the population, including the great majority of the urban population with an average population served of 3,600 people per contract. The public sector serves the remaining 22% of the population, mainly in rural areas, with an average population served of 565 people per contract.

Freshwater Total (1998, km 3) 180.0 Per capita (1998,m 3) 3,065 Withdrawals (1990, km3) 37.7 For domestic use (1987) 16% For industry (1987) 69% For agriculture (1987) 15%

Privatisation Private sector involvement started in 1853 with the founding of Cie. Generale des Eaux (VE), followed by Eaux de Banlieue in 1867 and Lyonnaise des Eaux (Suez) in 1880. By 1933, there were eight major private sector players in France, along with a number of smaller regional concerns serving 17% of the population. PSP rose to 31% in 1954, 44% in 1968 and 69% by 1986. In 1980, there were 50 private sector companies, many of them under the wings of VE and Suez. By 1990, five significant private sector entities remained. One new competitor (Ruas) has recently emerged, but this remains a local company. With the acquisition of SDEI by Suez in 1991 and CISE by Bouygues (SAUR’s parent company) in 1997, there were only three major private sector players left, serving some 78% of the population. Population served by management regime

Million Municipally run Delegated Overall 1998 2001 1998 2001 1998 2001 Drinking water supply Single municipality 8.6 7.6 16.5 15.4 25.0 23.0 Group of municipalities 10.0 10.0 25.0 27.1 35.0 37.1 Overal 18.6 17.6 41.5 42.5 60.0 60.0 Waste water treatment Single municipality 11.3 9.8 11.8 10.4 23.1 20.2 Group of municipalities 14.6 16.3 18.3 19.9 32.9 36.1 Overall 25.8 26.1 30.1 30.3 55.9 56.4



Source: Institut Francais de l’Environnement, in collaboration with the statisticians of the Service Centrale des Enquetes et Etudes Statistiques, 2004. Since 1990, privatisation of sewerage services has grown appreciably faster than for water since new sewerage schemes are usually only initiated when the contract is given to the private sector. Private sector market share is being gained more rapidly for sewerage contracts than for water. For example, VE served 19.8million people for water and 6.9million for sewerage in 1980, while Suez provided water for 14million and sewerage services for 6million in 1994.

Groundwater Total recharge (1998, km3) 100.0 Per capita (1998, m3) 1,703 Withdrawals (1990, km3) 6.2 For domestic us e (<1990) 53% For industry (<1990) 30% For agriculture (<1990) 17%

MAJOR CITIES Population 2000 2015 Status Paris 9,630,000 9,858,000 Private sector Lyon 1,353,000 1,446,000 Private sector Marseilles 1,290,000 1,358,000 Private sector Lille 991,000 1,036,000 Private sector Toulouse 761,000 871,000 Private sector

Regulatory study: Reforming France’s water services The chief domestic challenge facing both VE and Suez is the perceived lack of a competitive market, which is best demonstrated by the fact that until the Nantes sewerage concession award to VE in 1997, VE and Suez have never gained a contract from each other. The piecemeal nature of contracts in France has constrained the scope for economies of scale. VE has 2,300 contracts in France, with an average population served of 11,304, Suez has 3,000 (average 4,667), while SAUR has 6,000 contracts, each serving on average 1,083 people. Average water prices in France (€per M³)

1995 1996 1997 1998 1999 2000 1995 - 00 Water 1.01 1.04 1.07 1.08 1.10 1.11 10.6% Sanitation 0.71 0.78 0.78 0.80 0.82 0.83 17.5% Taxes 0.57 0.66 0.66 0.68 0.70 0.71 23.2% Total 2.29 2.48 2.51 2.56 2.62 2.65 15.9%

While revising prices during the life of a contract remains common practice, the traditional reason for such revisions has been to facilitate price rises. Indeed, until 1997, 80% of contract reviews resulted in upward price revisions. There has been a subsequent shift from increas es to cost cutting exercises. There has also been concern about the effect of a number of corruption scandals over contract awards, which have taken place in recent years. The government has threatened to take-over water contracts or their awarding process so as to penalise these companies. This may in result in genuine competition for water and sewerage contracts. Since 1997, the private sector has been providing the local authorities and national and regional audit offices with externally audited annual reports and results statements. The 1995 Loi Barnier also obliges local water authorities and municipalities to publish an annual report on water prices and quality, which will create an unprecedented degree of transparency in the market. Water prices now need to be renegotiated every five years as opposed to the previous limit of once every 15 years. In 2002 Nice negotiated a 15% cut in bills with Veolia, who had serviced the town since 1864. The city of Avignon negotiated a similar reduction earlier in the year, while Dijon gained a 10% cut from Suez. In 2004, Castres cancelled its contract with Suez after a dispute about proposed spending and price rises. There has been a significant move towards a centralised and activist regulatory regime as pioneered by Ofwat in England and Wales. VE and Suez regard the French market as being the most competitive in Europe despite controlling 85% of the private sector between them, while jointly operating some of the largest contracts. In a typical year, 12-15% of contracts in France are renewed. Suez had a contract retention rate of 84% in 2001 and VE retained 80% in 2003.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company National 2,300 water and sewerage contracts Generale des Eaux National 3,000 water and sewerage contracts Lyonnaise des Eaux National 6,000 water and sewerage contracts SAUR Gard & Herault 3 water contracts Ruas de St. Jean de Gard



Competition remains at an early stage The Syndicat Professionnel des Exploitants Indépendants des Réseaux d'Eau et d'Assainissement (SPEIREA) was founded as a grouping of water and wastewater service companies outside the three major companies. Since competition effectively started in 1995-96, 1-2% of the market has been gained by perhaps 10-12 independent companies. In the region of 350 municipalities are served by the four companies identified below. • RUAS provides water to 130,000 people and wastewater services for 120,000 people in 100 communes in

the South of France. The first noted contract gain was in 1996.

• SOGEDO (Société de Gérance de Distribution d’Eau) is based in Bordeaux and serves 66 of the 1,457 communes in the Rhone – Mediterranean – Corsica region. Revenues in 2002 were €7 million.

• La Société de Travaux Gestion et Services (STGS) provides water to 85 communes, totalling 75,000 people in four départements. The company was founded in 1989 and is part of STURNO, a French company involved in telephone, waste management and water equipment and services based in Avranches in North West France. STURNO has a total turnover of €45 million.

• Ternois Epuration was founded by Ternois Developpement France’s fourth largest manufacturer of wastewater treatment works founded in 1970. Ternois provides wastewater treatment for 150,000PE, or approximately 80,000 people in a number of municipalities across France. Revenues are approximately €9 million pa.



Generale des Eaux VE (France) 25,000,000 19,000,000 25,000,000 Lyonnaise des Eaux Suez (France) 17,000,000 9,000,000 17,000,000 SAUR Bouygues (France) 6,000,000 6,500,000 6,500,000 Ruas Ruas (France) 130,000 120,000 130,000 Ternois Epuration Ternois Developpement (France) 0 80,000 80,000 STGS STURNO (France) 75,000 0 75,000 Sogedo Sogedo (France) 50,000 0 50,000

A number of contracts are held jointly (e.g. Paris, Marseille, Lille & Versailles) so the country numbers include a significant element of double counting. In 2000, approximately 10% of the private sector share was accounted for by joint ventures, 12 between VE and Suez and 2 between Suez and SAUR. These arrangements are increasingly seen as being anti-competitive and by 2003, 5 of the VE/Suez joint ventures had been broken up.

GABON PART 2: COUNTRY ANALYSIS


GABON Gabon is an example of a relatively small and undeveloped economy that has nevertheless developed a series of private sector water and sewerage contracts over the past decade.


Water provision 40% of the population of Libreville has access to piped water but there are no sewerage or sewage treatment facilities serving the city. Nationally, 90% of the urban population is regarded as having access to safe water.

Population Total 2002, million 1.3 Total 2015, million 1.6 In urban areas 2002 83% In urban areas 2015 89% In urban agglomerations 2015 0%

Sewerage services Sewerage services are being developed under a delegated management contract with SOCAGI, a group comprising Suez (43%), Hydro Quebec (34%) and EDF (23%). SOCAGI was virtually bankrupt in 1994, having made a loss of CFAF14 billion in that year. The company is understood to be at least breaking even, although the scope for cost-cutting is difficult, due to some hostility towards further privatisation by the workforce.

Urban Services Safe drinking water 90% Per capita consumption (L/day) 66 Sewerage 55% % Sewage treated 0%

Privatising SEEG The Société des Eaux et de l'Electricité du Gabon (SEEG) has been earmarked for privatisation since 1993. The government was, however, reluctant to proceed, even though it has recognised that the private operator would contribute a significant amount of capital to the company, in return for a concession. In March 1997, VE gained a 20 year concession to operate SEEG’s services. SEEG generated revenues of F500 million from its electricity services and F200 million from water provision in 1996. VE initially acquired 100% of SEEG’s equity, 49% of which was in turn sold in a public tender with the equity being listed on the Libreville stock exchange. The concession serves Gabon’s three principal cities: Libreville, Port-Gentil and Franceville.

Freshwater Total (1998, km3) 164.0 Per capita (1998, m3) 140,171 Withdrawals (1987, km3) 0.1 For domestic use (1987) 72% For industry (1987) 22% For agriculture (1987) 6%

Groundwater Total recharge (1998, km3) 62.0 Per capita (1998, m3) 52,991 Withdrawals (1989, km3) 0.0 For domestic use (1989) 100%

Private sector contracts awarded (Please see the relevant company entry for details) Main urban areas 20 year water provision concession SEEG Urban areas Lease contract, sewerage development SOCAGI

GABON PART 2: COUNTRY ANALYSIS


Private sector company operations (Please see the relevant company entry for details) Company Parent company Population served (country) Water Sewerage Total SEEG VE (France) 450,000 N/A 450,000 SOCAGI Suez (France) 0 N/A N/A

GERMANY PART 2: COUNTRY ANALYSIS


GERMANY Water and sewerage services in Germany are being affected by a consumer backlash against what is being seen as an increasingly target driven approach towards service standards. In consequence, utilities are seeking to merge or attract private sector support to see how they can control their rising bills. Germany is a lynchpin for the central and eastern European water and sewerage markets and will play a major role in the accession process of those economies.


Regulations and charging mechanisms The Federal Ministry for the Environment, Nature Protection and Nuclear Safety is responsible for the enaction of the Federal Water Act, the Wastewater Charges Act, the Washing and Cleansing Agents Act and the Federal Nature Conservation Act. The Federal Ministry of Food, Agriculture and Forestry deals with water resources management projects in the rural economy. The Federal Ministry of Health is responsible for drinking water supply and quality. Effluents are charged for under the Wastewater Charges Act of 1976 (amended 1990). These charges are based on Schadeinheit (SE), or unit harm. One SE unit is the equivalent discharge of a human per year. The charges started at DM12 per SE in 1981 and were last revised at DM70 per SE in 1994. In addition, most of the Länder have regulations on the payment of a water abstraction charge of up to DM0.6 per m3. The revenue is used to support special environmental measures like the economical use of water, to subsidise innovative techniques or to protect catchment areas, e.g. by payments to farmers for changing land use patterns. The municipalities also have to pay this tax.

Population Total (2002, million) 82.4 Total (2015, million) 82.5 Urban areas (2002) 88% Urban areas (2015) 90% In urban agglomerations (2015) 43%

Development of sewerage infrastructure

1975 1990 1995 1999 Tertiary 5.0% 29.9% 72.3% 83.1% Secondary 64.7% 49.8% 12.2% 6.3% Primary 10.2% 5.9% 4.1% 1.1% Untreated N/A 3.8% 3.5% 4.8% Unconnected N/A 10.4% 7.9% 4.7%

The sewerage network is basic in the former GDR, with 62.4% of the population receiving treatment compared with 91.3% in Western Germany. Primary treatment accounts for 24.7% and 1.1% respectively, secondary treatment 27.1% and 5.6% and tertiary treatment reaches 10.6% and 37.4% respectively. Overall, 98 out of the former GDR’s 243 sewage treatment works comply with COD/BOD standards.

Urban Services, Western Länder only % Water 100% % Sewerage 100% % Sewage treated 99%

Inland water quality

Western Länder 1985 La – Very Good 6.5% Lb – Good 38.0% II – fair 40.0% III – Poor 14.0% IV-bad 1.5%

The rivers Ruhr and Rhine are considered problem areas. In addition, the Elbe, Wesser and Main are Class III/IV in their lower reaches. The Rhine Action Plan (1987) sought to improve the Rhine to Class I or II quality by 2000. The systematic examination of groundwater quality started in 1984. There are rising nitrate and phosphate levels,



while a number of sources have been closed as a result of excess PAH concentrations. Systematic data on the eastern Länder is currently being collected. It is fair to say that water quality and infrastructure are appreciably below those in the Western Länder. For example, in Brandenburg, 34% of rivers have water quality of I-II, 45% of II/III and 18% of III/IV. The water in the former GDR is of a poor quality as only 20% of surface water can be used for drinking water abstraction within reasonable efforts of purification.

Freshwater Total (1998, km3) 96.0 Per capita (1998, m3) 1,165 Withdrawals (1991, km3) 47.3 For domestic use (1991) 11 For industry (1991) 70 For agriculture (1991) 20

Compliance and upgrading forecasts In 2003, the German association of towns and parishes, the DStGB stated that it believed the upgrading of Germany’s water and wastewater system will require investment of about €75 billion over the next 10 years. This is in contrast to figures of €150-300 billion for sewerage and wastewater alone that have been the accepted norm since the 1990s. This perhaps reflects the work carried out to date as well as the savings that can be made when examining costs more closely. It has been found that private sector operators can significantly undercut assumed costs. The VpA was established in 1992 as an association of private sewerage operating companies. They have studied 200 projects across Germany and concluded that costs for developing facilities could fall by 15-40% when submitted to private tender. VpA found that conversion work for extant facilities can be carried out for DM250 per capita against previous assumptions of DM450-600 per capita. Investment in infrastructure

€billion 2000 2001 2002 2003 Water 2.36 2.44 2.28 2.56 Wastewater 6.84 6.85 NA 6.00 Total 9.20 9.29 NA 8.56

The cost for the customer Water production has fallen by 28% 1990-2002, with an average water fee of €1.77 per m³. Watger utilisation was 130L per day in 2003. In 2003, wastewater charges were €2.28 per m 3 against 2.18 per m³ in 2000.

1990 2001 Water sales (million m 3) 5,985 4,785 Price per m³ 1.18 1.70

Source: Ministerium für Verbraucherschutz In Western Germany, there have been legal moves to force water charges down in North Rhine-Westphalia, Bavaria and Baden-Wurttenburg. There is considerable resistance to further EU laws, because of the current high cost of water provision and sewerage services. In 1999, the State of Hess lowered water fees charged by Sudheissische Gas und Water AG, the municipally held water provider. The average household will pay DM745 as a result, some DM90 less than in 1998.




MAJOR URBAN AGGLOMERATIONS Population 2000 2015 Status Aachen 1,060,000 1,070,000 N/A Berlin 3,319,000 3,320,000 BWB privatised in 1999 Bielefeld 1,294,000 1,310,000 N/A Bremen 880,000 886,000 Sewerage privatised Rhein-Rhur South 3,054,000 3,089,000 N/A Rhein-Rhur Middle 3,233,000 3,335,000 N/A Rhein-Rhur North 6,531,000 6,554,000 N/A Rhein-Main 3,681,000 3,718,000 Privatisation under consideration Hamburg 2,664,000 2,683,000 HWW corporatised Hannover 1,283,000 1,291,000 N/A Karlsruhe 977,000 988,000 N/A Rhein-Neckar 1,605,000 1,621,000 MVV part privatised in 1998 Munich 2,291,000 2,317,000 N/A Nuremberg 1,189,000 1,204,000 N/A Saarland 891,000 892,000 N/A Stuttgart 2,673,000 2,703,000 N/A

Principal cities in the five regional agglomerations: Rhein-Main Darmstadt and Frankfurt am Main Rhein-Neckar Mannheim Rhein-Rhur Middle Düsseldorf and Mönchengladbach Rhein-Rhur North Duisburg and Essen Rhein-Rhur South Bonn and Cologne The municipalities and the private sector Water provision in 2002 Entity Status Million m3 pa Gelsenwasser-Group Private 364 Berlinwasser Private 217 Gelsenwasser-AG Private 140 Lake Constance Water Municipal 133 Hamburg Water Municipal (considering PPP) 128 Westphalian Water PPP 117 Munich Water Municipal 116 Stuttgart Water Municipal 89 Hildersheim Water Municipal 80 Eastern Harz Water Municipal 76 Rhenish-Westphalian Water Municipal 70 Essen Water Public-Private 70

The market remains broadly in the hands of municipalities and by quasi-private companies directly owned and controlled by municipalities. The best opportunities for private sector investment continue to be seen in the eastern Länder. In the east, water and sewerage are integrated at the municipal level. They are separate in the west. The EIB has been a major investor with municipal water projects in Germany, with €3,183 million of loans disbursed 1998-2002. In addition, the German Bank for Reconstruction has made a number of major loans, including €900 million for water provision and sewerage. The EU is providing €1,300 million in funding for water and environmental projects in the Eastern Lander between 2000 and 2006. The Western Länder has 1,429 water supply companies and some 6,000 water and sewerage entities in total. The desire to privatise sewerage in the Eastern Länder is stronger, with formal structures put into place by the privatisation agency to encourage the setting up of JVs and the award of concessions. Legal complications remain a problem, with the Rostock contract having been held back for two years because of these. Since 2002, there has been was an increase in the pace and scope of privatisation proposals. The city of Dresden in Saxony has sold a 49% stake in Dresdner Stadtentwässerung to Gelsenwasser in 2004. DS treats 130,000m³ of waste and surface water daily for 475,000 households and 1,100 industrial customers. Gelsenwasser is also taking over Emmerich in North Rhine Westfalia’s Abwasser Emmerich. Abwasser Emmerich provides wastewater disposal services for the town's 30,000 inhabitants. Gelsenwasser and EAM-Wasserversorgung (E.ON) has signed a 25 year contract with Bad Karlshafen to take over operational management of the town’s water and wastewater activities. E.ON’s Avacon (49%) and Vienenburg (51%) have formed a JV, a water and wastewater company named WAGV Wasser-und Abwassergesellschaft Vienenburg.



From 2003, Avacon will also take over commercial operations and billing. Annual water sales in Vienenburg are about 0.52million m³. Baden-Württemberg’s Emmingen-Liptingen will set up a new water supply company from its public works water department, to start operations at the beginning of January 2004 and in Hesse, the town of Fränkisch-Crumbach is considering PSP. Energieversorgung Offenbach (EVO) has a 25-year co-operation contract to operate water and wastewater operations for the parish of Mainhausen. EVO traditionally supplies the towns of Offenbach and Dietzenbach with drinking water and operates their wastewater services. The commune of Schwerin has become the first commune in Mecklenburg-Vorpommern to enter into a wastewater PPP. Operational management has been taken over by Wasser-Abwasser-Gesellschaft Schwerin, owned 51% by the municipal utility Stadtwerke Schwerin and 49% by Eurawasser. Hamburg is also considering a partial privatisation of Hamburger Wasserwerke (HWW). The state of Saxony Anhalt is seeking to sell its water supply company Fernwasser Sachsen-Anhalt (FSA). Consolidation in the public and private sectors continues. E.ON has consolidated its northern German operations, which supply 22,000 customers with water. These are Schleswag (Rendsburg), Hein Gas (Hamburg) and the Hein Gas’ eastern German subsidiary, HGW (Schwerin). Likewise, the state of Thüringia is encouraging water associations to merge. The Abwasserzweckverband Wipper-Ohne and Wasserzweckverband Eichsfelder Kessel are setting up the jointly-owned Wasser-und Abwasserzweckverband Eichsfelder Kessel.


Water Sewerage Total AWS Gelsenwasser (Germany) 20,000 55,000 55,000 Berlin Wasser VE/RWE (France/Germany) 3,900,000 3,900,000 3,900,000 Eurawasser Suez (France) 550,000 600,000 600,000 Gelsenwasser Gelsenwasser (Germany) 4,650,000 1,080,000 5,730,000 Hansewasser Gelsenwasser (Germany) 0 550,000 550,000 MVV Mannheim Municipality 1,050,000 400,000 1,050,000 Oewa VE (France)/VKR (Germany) 730,000 710,000 730,000 RWE Aqua RWE (Germany) 2,100,000 4,400,000 6,300,000 S’werke Göttingen Gelsenwasser (Germany) 50,000 0 50,000 Severn Trent Severn Trent (UK) 0 45,000 45,000 Stadwerke Görlitz VE (France) 80,000 80,000 80,000 Stadwerke Gera VE (France) 165,000 0 165,000 WTE EVN (Austria) 21,000 81,000 81,000

Politics and the private sector Bad Schwalbach in Hesse has let its contract with Süwag Wasser (RWE) expire at the end of 2002, after becoming coalition partners in the local government. This is despite Süwag’s good record in the four years since it took over these services in 1999.

€million 1996-98 1999-02 Investment 2.20 6.20 Profits -0.62 0.73 Price per m 3 5.14 4.93

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Altenburg 20 year sewerage BOOT WTE Berlin 30 year water and sewerage concession VE/RWE Bremen Sewerage and sewage treatment Hansewasser Döbeln/Oschatz 4 year water and sewerage management Oewa Gelsenkirschen 30 year water concession Gelsenwasser Gera O&M, water provision Stadwerke Gera Görlitz Municipal services Stadwerke Görlitz Goslar 25 year sewerage concession Eurawasser Göttingen Municipal services Stadwerke Göttingen Kiel Water and sewerage concession MVV Leipzig 25 year water and sewerage concession Oewa M-Pomerania Two 25 year concessions Eurawasser Nohra 10 year sewage treatment management Severn Trent Rostock 25 year sewerage concession Eurawasser Saxony Two 25 year water concessions Eurawasser Saxony Anhalt Water and sewerage contracts Owea Windeck 25 year water and sewerage BOOT WTE

GREECE PART 2: COUNTRY ANALYSIS


GREECE The partial flotation of EYDAP and EYATH demonstrates that there is a desire to invest in entities that have been restructured so that they report to international accounting standards. A post-Olympic lull appears likely.


Water resources and management There has been a substantial increase in water usage since the 1970s. A slight decrease in consumption since 1992 has not been enough to alleviate the continual water shortages being encountered. The proportion of the population connected to sewerage services increased from 0.5% in 1980 to 10% in 1990 and to 58% by 1994. There were 26 sewage treatment works in 1988, of which 2 serve cities with a population in excess of 100,000. The proportion of the population served by sewage treatment has remained constant at 11% in recent years.

Population 2002 (million) 11.0 2015 (million) 10.9 Urbanisation, (2002) 61% Urbanisation, (2015) 65% In urban agglomerations, 2015 41%

Water services The only water treatment takes place in Athens. Other municipalities carry out chlorination only. Water consumption varies from 150 L/day in small cities to 250-350 L/day in larger cities. There was EU funding (70%) and government funding (30%) of €3.75 billion of water and sewerage upgrading work between 1994 and 1999.

Urban data Served by piped water 86% Access to sewerage 60% With sewage treatment 30%

Development of sewage treatment 1993 1994 1997 Tertiary 3.8% 0% 9.6% Secondary 12.7% 9% 14.2% Primary 32.8% 1% 32.4 Sewerage only 18.2% 48% 11.6 Not connected 31.5% 42% 32.2%

Freshwater Annual availability (1998) 45.2km3 Per capita 6,562m 3 Annual withdrawal (1990) 7.0km3 Domestic 16% Industrial 3% Agriculture 81%

Water issues Groundwater depletion and salination is widespread, especially at Patras, Iraklia, Alexanpolis and Preveza. Groundwater depletion is also taking place in Thessaloniki (1million inhabitants). Athens is fed by canals and tunnels from a network of rivers and dams (3.5million inhabitants). 4.141million people in central Greece face regular water shortages.

GREECE PART 2: COUNTRY ANALYSIS


Inland water quality (1986, estimate) Ia-Very Good 20% Ib-Good 40% II-Fair 20% III-Poor 15% IV-Bad 5%

In 1993, the government started moves to restrict water usage. The first 60m 3 pa per household is charged at a basic rate. Any water used above 400m 3 pa per household is charged at 20 times that rate. The law No 1665/80 of 1980 established state funded water and sewerage corporations. These are either self standing entities for large cities or municipally run entities. These corporations are now being grouped, so as to encourage EU and private sector funding. It is likely that private partners will be encouraged to enter the sector in the short to medium term.

Groundwater Annual availability (1998) 2.5km3 Per capita 237m 3 Annual withdrawal (1980) 1.9km3 Domestic 13% Industrial 3% Agriculture 85%

Joining the EU fold Until recently Greece remained quite dependent on EU Cohesion and Structural Funding for all environmental compliance projects, while keeping all water and sewerage services, where they occurred, in municipal ownership. Between 1993 and 2002, Greece received €1.95 billion in Cohesion Funding for environmental projects. The easing of EU funding from 2000 forced a reconsideration of the country’s policies. MAJOR CITIES City 2000 2015 Comments Athens 3,116,000 3,138,000 EYDAP partially floated in 2000 Thessalonki 789,000 825,000 EYATH partially floated in 2001 Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Athens 20 year water and sewerage concession EYDAP Thessalonki 25 year water and sewerage concession EYATH Flotation of EYDAP and EYATH In April 2000, 28% of EYDAP was listed on the Athens Stock Exchange in a nine times oversubscribed issue. The issue raised €233 million for the company and allowed its activities to be run on a commercial basis. The government will retain control of its water production facilities in the medium term and will be responsible for its investment programme until 2008. This was followed in 2001 by the flotation of a similar stake in Thessalonki’s EYATH. In July 2003, the Finance Minister announced the sale of up to 20.3% of Athens Water by the end of 2003. This sale has yet to take place. In 2003, Hellenic Technodomiki, Greece’s largest construction company, and local government authorities formed a partnership in order to manage the Dodecanese island group’s water resources. Private sector company operations (Please see the relevant company entry for details)


EYDAP Athens Municipality 4,000,000 3,300,000 4,000,000 EYATH Thessalonki Municipality 850,000 850,000 850,000

GUINEA PART 2: COUNTRY ANALYSIS


GUINEA Water and sewerage services in Guinea have been subject to various funding and restructuring programmes since 1976. These have met with some success in recent years, although the challenge of ensuring that water payments are both on a sustainable basis and are seen by customers to be fair has only partly been met to date. For the private sector, operating under a lease contract has perhaps been a constraint in recent years.


From DEG to SONEG The Enterprise Nationale de Distribution des Eaux de Guinee (DEG) was responsible for all technical and commercial operations up to the end of the 1980s. From 1976 to 1985, the World Bank provided a restructuring loan, the results of which were extremely disappointing in spite of extensive technical assistance from abroad. Indeed, by 1985, the urban water supply system in Guinea was one of the least developed in West Africa. The utility had no management autonomy from the ministry and was not able to finance maintenance work. In 1986 the Guinean authorities decided to liberalise the water management regime and in 1987 established Société d’Exploitation des Eaux de Guinee (SONEG) as an independent water services provision company wholly owned by the state. SONEG was responsible for implementing and managing water supply, acting as owner of the facilities to serve Conakry, the capital, and 16 other towns. The Minister of Natural Resources and Energy remains responsible for approving and monitoring any capital investment.


Commercialising water provision In 1987, the World Bank recommended that radical institutional reform be carried out, with financial support from the IDA, transferring management and risk to the private sector. The legal separation between asset-management activities (SONEG) and operating activities (SEEG) took place in 1989 with the two companies formally established. One, the newly created Société Nationale des Eaux de Guinée (SONEG), was to be responsible for conserving and enhancing the public assets, but also for servicing the debt by levying a fee on the managing entity. SONEG in turn awarded a ten year leasing contract for operations to SEEG (Société d'Exploitation des Eaux de Guinée), which has the task of supplying water in Conakry and a number of smaller cities for a period of 10 years. The contract can be renewed at the end of this period. SEEG was then privatised, with the government maintaining a 49% stake in the entity.


Accountability and affordability All of SEEG’s activities are defined in its terms and conditions and in a three-year performance contract. SONEG derives its income from a fee paid by SEEG. The latter, for its part, operates the water supply facilities. It also carries out maintenance of the facilities and replaces smaller items of equipment. Lastly, it takes care of all aspects of consumer relations. At the outset, tariff reforms would have created problems because water had never been regarded as an economic good. The Guinean authorities therefore decided upon a six-year transition period during which the rate actually paid by the consumer would be lower than the full rate, thanks to subsidies from the state and from external sources. The World Bank paid a subsidy for the six years (having required the introduction of a realistic price) which gradually decreased after the first four years. This was to ensure that the sudden increase in price did not appear to be excessive for the users.

GUINEA PART 2: COUNTRY ANALYSIS


Freshwater Annual availability (1998) 226.0km 3 Per capita 29,454m 3 Annual withdrawal (1987) 0.74km 3 Domestic 10% Industrial 3% Agriculture 87%

Operations and actualities Fees collected by SEEG go towards paying service providers, covering distribution costs and for operations and investments carried out on behalf of the facilities owner (SONEG). SEEG began operations against a backdrop of severe water shortage and a network in a poor state of repair, along with some cultural difficulties. For example, a profit-oriented company needed to be developed, and customers had to be educated about the qualities of drinking water, how to avoid wasting water and why water had to be paid for. The performance of the contract to date has been mixed. Between 1989 and 1995, the cost of water rose first from US$0.12/m3 to US$0.25/m 3 at the start of the contract and progressively to US$0.90/m 3. In 1989, 15% of urban dwellers had access to piped water. This had increased to 52% by 1996. Meanwhile, water connections increased from 8,500 in 1975 to 12,000 in 1989 and to 30,500 by 1995. Metering also increased from about 5% to 85% of all connections. The bill collection ratio improved from below 50% in the years 1986-88 to 75% in 1995. However, one third of the accounts have been suspended because of the cost of water. The company remains biased towards operations in Conakry, which accounts for most of the country’s urban area and economic activity and accounted for 75% of consumers and 88% of water supplied in 1995.


The scope for conflict The Guinean Government’s 49% per cent share gives it some control over management decisions and it has the right to approve all changes of a legal nature. There is one potential problem with this relationship, which is that there is no independent regulator. The balance of stakeholder concerns may be affected in the future by the government seeking (or seen as seeking) to optimise the return on its shareholding at the expense of customer concerns. The current challenge for the contract is to see how the customers’ willingness and their capacity to pay in a period of economic difficulties will be affected by the ending of all subsidies. It is understood that some tensions exist between SONEG and SEEG with regard to the operational interpretation of the contract. SONEG sticks to the contract rigidly, while SEEG is seeking to have a greater degree of operational freedom. This perceived need for further operational flexibility is to be one of the main elements of the current contract renewal negotiations . The term of the lease contract is currently expiring and the system is now capable of attracting a concession contract. For the latter to succeed, affordability needs to be addressed, along with the relationship between SONEG and SEEG. MAJOR CITIES City 2000 2015 Status Conakry 1,232,000 2,073,000 Privatised (SEEG)

Private sector contract awards (Please refer to company entry for details) Location Contract type Company Conakry & urban areas Water and sewerage lease SAUR/VE

Sources: Cowen, P. B. (1996). The Guinea Water Lease – Five Years On. The World Bank. Franceys, R. (1997). Private Sector Participation in Water and Sanitation Services. Water Resources Occasional Paper No. 3, WEDC, Loughborough University, UK. Haarmeyer, D. & Mody, A. (1998). Worldwide Water Privatisation. Financial Times Energy, London.

GUINEA-BISSAU PART 2: COUNTRY ANALYSIS


GUINEA-BISSAU In Guinea-Bissau, Suez has provided management support for water services since 1991 in order to improve the technical and financial performance of EAGB, the public water and electricity utility. This contract is based on Suez receiving 75% of its income on a fixed fee basis, with the remaining 25% being performance-linked. The lack of a clear management role and the inability to take action over identifiable areas of under-performance has meant that this has been a difficult compromise for both the state and the private sector. The state has continued to fail to make its payments to Suez on time, while funds earmarked for investments in the network’s infrastructure have not emerged. At the same time, tariffs have not been revised so as to allow billings to meet operating costs. Nationally, Guinea-Bissau suffers from poor water availability and catchment degradation where water sources occur. 32% of the urban population had access to potable water in 1996, compared with 19% in 1991. 24% of the urban population had access to adequate sanitation in 1996. The country is forecast to have an urban population of 280,000 by 2000, some 20% of the national total. One of the problems evident in a contract such as the one with Suez is the size of the market in relation to the costs required to fully reform the cost recovery process. In a contract of this size, it may well be cheaper for a company such as Suez to let matters rest rather than to address any underlying problems. In the longer term, countries such as Guinea-Bissau are likely to demonstrate the limits of private sector involvement.

HONG KONG and MACAU PART 2: COUNTRY ANALYSIS


HONG KONG AND MACAU Water provision and management The Water Supplies Department is respons ible for the SEZ. Imports of water from China ria the New Terrirotires total 810million m 3 pa. This water is mainly provided by GDI. Treated water usage by households is relatively low at 111L per day because salt water is used for all flushing. 98% of households are connected to piped water, along with sewerage for 90% of urban households. Sewerage and the Strategic Sewage Disposal Scheme In 1988, 20% of the territory’s sewage effluent was subjected to primary treatment while 1.5million m 3 of industrial and domestic sewage effluents were generated per day. Effluents collected from the Kowloon Peninsula and the northern part of Hong Kong Island were discharged, with or without passing through preliminary treatment plants, directly to Victoria Harbour. The Strategic Sewage Disposal Scheme (SSDS) is designed to serve Kowloon Peninsula, the northern part of Hong Kong Island, and Victoria Harbour. The Water Pollution Control (Sewerage) Regulation of 1994 requires all properties to be connected to the sewerage mains. Stage 1 of the SSDS was completed in June 1997, before Hong Kong was taken over by China. The STW is designed to handle effluents for 3.5million people by 2021. The CEPT plant is designed to remove 85% of suspended solids and 50% of BOD. After treatment, the effluent will be discharged to the Western Harbour through a 1.6km long 5m diameter submarine outfall. The total cost for Stage 1 was HK$5.2 billion (US$0.67 billion). This included HK$2.1 billion for the sewage treatment works. The O&M cost for the Stage 1 scheme is HK$300 million per year (US$38.5million per year), recovered by a sewage charge collected from citizens/residents of Hong Kong. The capital cost was borne by the Hong Kong Government. Stages 2-4 have been completed at a cost of HK$7 billion. A site at Mount Davis on the west tip of Hong Kong Island is reserved to accommodate a secondary treatment plant if the future monitoring of water quality at the outfall reveals that such a plant is necessary. The additional cost of a secondary treatment plant will be in the order of HK$4 billion (US$0.52 billion) at 1995 prices. Privatisation and the private sector With the exception of bulk water provision from China, all water and sewerage activities are held by the municipality. Guangdong Investment Ltd supplies 75% of HK’s drinking water. If the secondary treatment works project goes ahead, there is a possibility of this being financed by a private sector BOT award. The Sha Tin WTW is meant to treat 1.23million m3 of water per day or 40% of current demand, but the 1964 plant needs to be rebuilt as it is performing poorly. Upgrading the facility will cost HK$6.7 billion (US$850 million) and work is due to start in 2006. The contract may be awarded as a BOOT and may be allied with a distribution and customer services contract. Macau In contrast to Hong Kong, the former Portuguese colony of Macau (Macao) privatised its water and sewerage services between 1983 and 1993. In 1996, the colony renewed the 1988 water provision concession for SAAM, for a further 25 years. The contract serves some 600,000 people via 140,000 customer connections. This was awarded to Sino-French Holdings (Suez and New World Infrastructure) which holds 85% of SAAM’s equity. In 1993, NWWI (United Utilities) was awarded two 4 year BOT sewage treatment works contracts in partnership with Toboia Duarte SA and Soares de Costa. These projects were completed before China took over Macau in 1999. Since 1982, distribution losses in Macau have fallen from 40% to 11% while rising from 27% to 37% in Hong Kong. While water prices as charged in Hong Kong and Macau are level pegging at HK$4.2 per m3 since 1997, the actual cost of water services ain Hong Kong are HK$11.0 per m3 resulting in Hong Hong’s services making a loss com pared with Macau Water’s 28% return on equity. Source: Lam, P-L. A comparative study of water utilities in Hong Kong and Macau. Asian Water, December 2003, pp 19-22.

HUNGARY PART 2: COUNTRY ANALYSIS


HUNGARY With the EU accession compliance programme in full swing, attention is once again turning from Budapest towards challenges and their solutions across the rest of the country.


Water pollution concerns Industrial pollution of surface and groundwater is a major problem. Groundwater quality is decreasing. 35% of groundwater resources are regarded as failing acceptable standards, with nitrate levels being a particular problem. In total, 60% of groundwater needs treatment prior to use. Waters from the Danube are regarded as an unreliable source to depend upon, because of the pollution load. In the south and central areas, there are extensive seasonal water shortages.

Population Total (2002, million) 9.9 Total (2015, million) 9.3 Urban areas, (2002) 65% Urban areas, (2015) 70% In urban agglomerations (2015) 19%


Population served 1970 1980 1990 1992 1996 2000 Tertiary 0% 0% 0% 0.9% 8% 31% Secondary 4% 12% 22% 11% 25% NA Primary 2% 7% 9% 4.4% N/A 15% Preliminary 19% 62% 59% 26.7% 48% 5% None 75% 19% 10% 57% 10% 49%

The proportion of population with sewerage services increased from 19% in 1980 to 49% in 2000. In 1995, 96% of the population was connected to mains water supplies. The country plans to spend US$4.8 billion on sewerage service extension work between 1996 and 2010. A further US$1.5 billion is to be spent on water provision during this period. Some US$0.75 billion was spent on sewerage work between 1990 and 1995. Connection to mains water and sewerage

%Water % Sewerage 1980 75% 40% 1990 92% 52% 1992 94% 54% 1993 95% 55% 1994 96% 56% 1995 96% 58%


Privatisation There are now more than 400 different water or wastewater service providers in Hungary, although 80% of the market is accounted for by the 25 largest firms. Municipalities regard water provision and sewerage as being a non-profit activity, with water supply obligatory, even to non payers. Prices have to be confirmed with the municipality concerned before the concession is formally granted. In 2004, the Hungarian National Water Directorate is expected to submit a draft law to parliament regulating private sector involvement in the water and wastewater sector. Present legislation prevents private companies from gaining a majority stake in water and wastewater utilities. This is directly related to the need to raise funds for the EU accession programme and is likely to be used to encourage concession contracts.

HUNGARY PART 2: COUNTRY ANALYSIS


Freshwater Total (1998, km3) 6.0 Per capita (1998, m3) 604 Withdrawals (1991, km3) 6.3 For domestic use (1987) 9% For industry (1987) 55% For agriculture (1987) 36%

Privatisation of Budapest Fovarosi Csatonazasi, Budapest’s sewerage services was privatised in 1997. A 25% stake was sold to a joint bid by Berliner Wasser-Betriebe and Veolia. Financing of the project is via 25% equity and 75% debt. The concession involves the construction of 150km of sewerage piping and expanding the South Pest STW by 40,000m³ per day. The operational contract for Favorsi Vizmurek Rt., Budapest’s water provision utility, was awarded to Eurawasser AG. The concession award was delayed when the municipality blocked proposals to raise water fees. Water provision for the city was 285million m³ (drinking) in 1996, along with 8million m³ for industry. 98% of the city is connected to mains water. Water fees were Ft1.2 per m³ in 1990 and Ft45 per m³ in 1996. In January 1999, water fees rose by 13% and sewerage charges by 16.7%. In total, utility fees rose by Ft 230 for the average household.


MAJOR CITIES Population 2000 2015 Status Budapest 1,819,000 1,819,000 Water and sewerage privatised separately

City study: Upgrading Budapest’s sewage treatment 53% of the population of Budapest is connected to the sewerage network, 54% of which is treated: 33% to secondary standard and 67% to primary standard. The two extant STWs are being upgraded and four wastewater treatment works are to be built for Budapest by 2015. The Dunaújváros and Veszprem STWs are currently under preparation. Csepel has been completed (600,000m³ per day) and South Budapest for 2005+ (60,000m³ per day). After the two STW upgrades, 40-45% of effluents in Budapest will be treated to at least secondary standard. The trunk main will be connected to a further 19,000 people currently using septic tanks. At Dunaújváros, 60 kilometres south of Budapest, a new 15,000m 3 per day secondary sewage treatment plant is to be built. The Veszprem Sewerage Project in Budapest is a US$77 million JV between CH2M Hill and Bovis for sewers and a wastewater treatment facility, and a 25 year operating concession.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Budapest 25 year sewerage concession BWI Budapest 25 year water provision concession Eurawasser Debreen 20 year water and sewerage concession Eurawasser Kapsovar 25 year water and sewerage concession Suez Pescs 25 year water and sewerage concession Suez Borsodviz 20 year water and sewerage concession Borsodviz Rt. Hodmézövásarhely 25 year sewerage concession BWI

Private sector company operations (Please see the relevant company entry for details )


Eurawasser Suez (France) / RWE (Germany) 2,217,000 217,000 2,217,000 Kapsovar Suez (France) 75,000 75,000 75,000 Pesci Vizmu Suez (France) 180,000 180,000 180,000 BWI VE (Germany) / RWE (Germany) 0 1,950,000 1,950,000 Borsodviz Rt. Gelsenwasser (Germany) 150,000 150,000 150,000

INDIA PART 2: COUNTRY ANALYSIS


INDIA The government hoped to provide potable water to all of India by August 15, 1997, the 50th anniversary of independence. Instead, according to UNICEF (the United Nations Children’s Fund), in 1998, 1million children per annum were dying in India from diarrhoeal diseases, while 45million people were affected by contaminated groundwater. A new universal service target has been set for 2004. After years of delays, the opening up to private sector investment of water and sewerage remains a tantalising prospect, characterised by India’s exceptionalist approach. Political delays and the need to demonstrate genuine value for money make this a market for the patient. While the withdrawal of foreign companies from a variety of power projects during 2002 does not inspire confidence, it is also evidence that real progress can be made through capacity building exercises.


Politics and Government The pace of progress is summed up by the National Water Resources Council, which was formed to address urgent state and national water issues. It has met four times since 1983 and no decisions have yet been made on updating the 1988 national water policy. For cities, water and sewerage policy is carried out at three levels: central government, the member states and city government. Central government directs overall policy. The Ministry of Environment and Forests (MEF) oversees the Central Pollution Control Board (CPCB) and the National Rivers Conservation Directorate (NRCD). The CPCB is backed by the 1974 Water (Prevention and Control of Pollution) Act and sets national environmental standards (individual states are free to exceed them) and policy. Each State Pollution Control Board in turn reports to the CPCB, while being responsible for ensuring compliance with the government’s environmental law. The Water (Prevention and Control of Pollution) Cess Act 1977 compels specified industries to pay fees to the relevant State Pollution Control Boards for water consumed. The 1995 Water Information Act puts the centralisation of water data on a statutory basis. The NRCD is involved in the various River Action Plans designed to improve the water quality of India’s 14 main water basins. The MUD (Ministry of Urban Development) advises all state level plans. It examines proposals and provides guidance. Plans, when approved are forwarded to the Ministry of Finance and the Dept of Economic Affairs for external support, for example. via the World Bank and the Asian Development Bank, along with the ODA on a more local basis. Cities are autonomous from central government with regard to privatisation policy. The MUD is positive about privatisation on an O&M and BOT basis, reflecting their concern about the pace of sanitation projects. The cities of Delhi, Bombay (Mumbai), Calcutta, Hyderabad, Bangalore and Madras can set their own tariffs. The MUD water provision targets are 110L/day for cities and 270L/day for Delhi. In 1992, it was found that the average per capita water supply for Class I towns (100,000 and above) was 147L/day and 78L/day for Class II towns (50,000 to 100,000). Only connect? The Indian Government is considering a scheme to link 37 of the country's rivers into the canal network at a cost variously estimated in 2003 at US$116-200 billion against an estimate of US$68 billion in 1995. To date, nine years of feasibility studies have taken place and construction would take a further 14 years to complete. Bangladesh has raised objections about the losses that the project would entail.

Population Total 2002, million 1,049.5 Total 2015, million 1,246.4 In urban areas 2002 28% In urban areas 2015 32% In urban agglomerations 2015 12%

Infrastructure development According to the Ministry of Rural Development, 1.2million out of 1.4million villages, or 89% had access to water in 2002, with R340 billion (€7.45 billion) having been spent on various drinking water projects across the country. The UNICEF 2000 estimate for access to safe drinking in rural areas in India was 79%. The Government has set a target of providing universal drinking water connections by 2005.



Data from the 2001 Census of India is still being processed, but information on household connections has been released. Urban households: Sanitation

Water closet 46.1% Pit latrine 14.6% Other latrine 13.0% Internal sanitation 73.7% Closed drainage 34.5% Open drainage 43.4% No drainage 22.1%

Urban households: Drinking water

Tap 68.7% Hand pump 16.2% Other 19.1% Tap – within premises 49.7% Tap – near premises 15.1% Tap – away 3.9%

For Class 1 cities, 73% of water is abstracted from surface water, 23% from groundwater and 4% from combined sources. For cities in major river basins, these are 68%, 30% and 2% respectively, and for cities in coastal areas, 87%, 3% and 10%. Overall, 32% of usable groundwater resources are currently being extracted. Spending on water and sanitation has increased in recent years and this trend is set to continue. The estimated cost will be Rs204,898 million, with Rs83,506 coming through the World Bank and Rs18,060 million from Hudco. Both the timings and the costs are likely to be on the optimistic side, with universal access to potable water unlikely before 2015 and sanitation taking another decade. The real cost for access to water is likely to be in the region of Rs400-800 billion and a further Rs500-1,000 billion for sanitation and wastewater treatment.

Urban Services Safe drinking water 85% L per cap per day 147 Access to sewerage 34% % Sewage treated 3%

Sewerage and sewage treatment Sewerage services are defined as operating on two levels. 'Sanitation' refers to lavatories with a two septic tank composting system. 'Sewerage' refers to mains sewerage. Access means at least a public lavatory in the same street. The sewerage connection figure stated refers only to the 212 Class I cities (a population of 100,000+, covering 102.9million people in 1988). In class 1 citiies, 20% of effluents are treated (13% secondary and 7% primary). In Class II cities (50,000-100,000), covering a further 20.7million people, 0.4% sewage is subject to primary treatment and 1.7% to secondary treatment. There are no other identified sewage treatment works in India. Overall, 8 out of 3,119 towns and cities have complete sewerage and sewage treatment services. 20% of towns and cities have partial service coverage. In 2002, 20% of people in urban areas had access to water-flush toilets connected to a sewerage system and 14% use water-borne toilets connected to septic tanks or leach pits. In rural areas, 20% have access to sanitary toilets. Informal examinations of the 14 major river basins in the 1990s found that 30% of their length is of I-II quality and 70% is of III-IV quality. Some sources maintain that the 70% figure refers to Class IV only. Sewage effluents are estimated to account for 75% of the wastewater volume and 50% of the total pollution load. The politics of privatisation India’s exceptionalist tradition means that the onus lies with foreign investors to argue the merits of their proposals in Indian terms. The National Rivers Conservation Directorate is willing to support BOT bids as part of its future policy. A number of states and cities, including Harayana state, Calcutta and the Ganges Basin are understood to be keen to look at STW BOTs. In contrast, the Government seeks private sector investment first in the area of drinking water. The Congress Party has indicated that it supports international involvement for drinking water provision and sewage treatment projects. As part of the 2004 budget, the Government announced plans for a desalination plant in Chennai. This would be the first of a series of such plants to be built near Chennai, the coastal capital city of



the southern Indian state of Tamil Nadu in 2004. The project will be financed through a public-private partnership. The Rs 10 billion ($217.39 million) plant would have a capacity of around 300 million L per day. It was also emphasis ed that public-private partnerships will be encouraged for the expansion of water supply and sanitation. A Board for Reconstruction of Public Sector Enterprises (BRPSE) will advise the Government on the measures to be taken to restructure PSEs, including cases where disinvestment or closure or sale is justified. The Accelerated Rural Water Supply Progamme (ARWSP) has been allocated Rs 26 billion in 2004-05. It will focus on renewal of water sources and on serving uncovered and partially covered habitations. The Urban Water Supply Programme will also spend Rs 1.5 billion in 2004-05 on projects in 2,151 small towns. The BJP at the national level has also stated that it supports the privatisation of utilities, allied with foreign investment. Local BJP administrations such as the Mumbai Municipal Council will not necessarily support privatisation. The Left Front remains ambiguous about foreign investment. Their stance is that foreign investors ought to demonstrate that India will benefit from their actions. The swadeshi (self-reliance) approach is losing favour, with only a small proportion of middle-income families supporting it. Outsourcing work in progress Progress has been made in some areas. Involving the private sector in the contracting out of operation and maintenance (O&M) work has been gathering in popularity in India. In Madras, contracting out sewerage O&M since 1993 has resulted in savings of 20%. In Ajmer (Rajastan), a service contract for water piping, pumping and treatment O&M has been regarded as a success, while Hyderabad has contracted out staffing for water treatment O&M work. Proposals for private sector management in Goa and the cities of Tirupur and Dewas are also currently under active consideration. The partial privatisation of Tirupur’s services has suffered from severe underfunding to date. The Tirupur water provision BOT was meant to get the go-ahead in March 1999, but has suffered from delays. This is due to a lack of support from industrial customers, who prefer irregular supplies of tankered water than the Rs 45 per 1,000L to be charged. The Rs 11.6 billion project involves bulk water provision, followed by water distribution and sewerage with a 30 year concession period. The Goa project is for abstracting water at source, transporting it 60km to a reservoir and handing it over to the municipality. In addition, the management of the sewerage network will be put out to private sector operation. This project has been under development since early 1997. In Bangalore leakage detection and strategic planning is partially outsourced and private detectives – paid only by results – are employed to detect illegal water connections. Similarly Chennai Metro has also shared its use of service contracts. Such cities say they have contracted out between 50% and 100% of the management of water treatment plants, pumping stations and wastewater treatment plants and that this has generated cost savings of between 10% and 50%.

Freshwater Total (1998, km3) 1,850.00 Per capita (1998, m3) 1,896 Withdrawals (1990, km3) 500.0 For domestic use (1987) 5% For industry (1987) 3% For agriculture (1987) 92%

Water supply and demand If current trends over the next 50 years continue, the Tata Energy Research Institute (TERI) predicts that India's rivers and lakes will no longer be able to meet the demand for water from the country's 1.57billion people. Water availability per person has already gone down from 6,000m3 in 1947 to 2,000m 3 in 1997 and could fall to 760m3

by 2047. India currently has a national average of 2,464m3 per capita, although in some regions it is as low as 411m3. India will become a water-scarce nation by 2050 unless urgent steps are taken that go beyond government capital investment in irrigation projects. In three agro-ecological zones (Western plains and Kachch, Northern plains, and the Bengal and Assam plains), the availability of water in 2047 will be less than 75% of the demand. Although the greatest demand for water will still come from agriculture, domestic water demand will increase from 20,000 million m3 in 1997 to about 41,000m3 per year in 2047. Moreover, the demand will be concentrated in the cities and will be for water of higher quality. Demand by industry

1970 6million MI 1990 15million MI 2000 30million MI 2025 120million MI

Pricing Water was traditionally seen as God’s gift both by Hindus and Muslims. This means that there is considerable pressure at the local and rural level for it to be provided as a free (or nominally priced) resource, especially for



domestic use. The 74th constitutional amendment gives local authorities the responsibility for planning, operating, maintaining and upgrading water supply, sewerage and sanitation services. Funds have to be raised by the authority, which also has the right to determine and enforce its own charges. In many cases, attempts to start operating water services on a self financing basis have focused on using higher industrial charges to cross subsidise domestic fees. Given the small size and uneven distribution of India’s industry, this approach has not met with great success to date. A survey of water prices in 2002 (GWR 169, 2003) found that municipal water tariffs covered 4-12% of the cost of water treatment and delivery.

Rs/m3 Delhi Bangalore Water cost 9-10 40 Water tariff 0.35 5

The Water (Prevention and Control of Pollution) Cess (Amendment) Bill introduced in 2003 seeks to strengthen the financial resources of pollution control boards and promote water economy by factories. The tax was last increased in 1991, resulting in a rise in annual income from Rs81.3 million to Rs 637.8 million in 2000. The new charges are expected to bring in around Rs 2 billion a year. State Pollution Control Boards will receive 80% of tax revenues , with Delhi retaining the balance for the central pollution control agencies. The tax will be applicable to all industries, except hydropower and seeks to encourage water conservation. Delhi’s fundamental financial challenge Annual operating costs for the Delhi Jal Board (DJB) have gone up from Rs2.76 billion (US$61 million) in 1998 to Rs7billion (US$154.7 million) by 2003. DJB has annual revenues of Rs 2.30 billion (US$50.8 million) and debts of Rs36 billion (US$795 million) and Rs16.2 billion (US$357.8 million) in interest liability. Legislation will be sought in order to establish a Delhi Water Regulatory Commission, the first such water structure to be formed in any Indian state. About 85% of water supplies serve residential consumers who pay Rs0.53 (£0.006) per m3. As 75% of municipal connections are unmetered, there is a need to consider metering before tariff rationalisation can be implemented. The unregulated private sector thrives under these conditions in Delhi, with 1,200 private tankers Rs100 (US$2.20) per m 3. Although DJB will be corporatised, politicians have ruled out any material private sector involvement.


The private sector and privatisation The Eighth Five Year Plan aimed for expenditure for water and sanitation services to increase from 0.56% to 3.80% of total public sector expenditure, with a total public sector outlay on water supply and sanitation for urban areas of Rs 57.6 billion. The total investment requirements for water supply and sanitation based on various reports indicate that an investment of Rs254.9 billion is required for 100% coverage of urban water supply and sanitation. In consequence, there is a broad realisation that private sector financing and management is now needed in India. The average annual investment on O&M of urban water supply and sanitation s ystems has been estimated at Rs 23.87 billion (for a population of 217million at Rs110 per capita). In 2002, the Tata Energy Research Institute recommended that the state of Gujarat considered some form of PSP in seeking to meet its Rs8,600 million spending needs for basic urban water supply. The institute believes that all PSP models are applicable under current state laws. In 2003, the state government of Karnataka examined privatising urban drinking water supply and Jharkhand issued a notice seeking private investor participation of in water supply in Ranchi, Dhanbad, Chas, Mango and Adityapur towns. Bulk water provision projects proposed to date City Cost

(Rs million) Type Security Status

Bangalore, Karnakata 13,000 BOOT State guarantee Evaluation stage Cochin 4,000 BOT State guarantee Abandoned Hyderabad, Andhra Pradesh 5,000 BOOT State guarantee Abandoned Panjum, Goa 3,000 BOOT State guarantee Re-evaluation Pune, Maharashtra 7,500 BOT Debt from state Abandoned Tirupur, Tamil Nadu 15,000 BOT State guarantee Operational Chennai, Tamil Nadu 10,000 BOT State guarantee Evaluation stage



Indian companies noted Four contract awards to Indian companies have been identified, three of which are in operation. IVRCL: Alandur wastewater treatment First STP Private Ltd (95% held by IVRCL)is a JV with VA Tech Wabag. It is developing a 12,000m 3 per day (4.4 million m3 pa) WWTW at Perungudi for Alandur Municipality, where IVRCL has installed the underground sewerage system. The WWTW has been completed and the households need to be connected to the system by the municipality. BHEL: Chennai WWTW In September 2003, BHEL gained a wastewater treatment construction and operations contract in Chennai. The Rs364 Million (US$7.9 million) contract was awarded by the Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB). Cons truction will take 18 months, with the facility entering service by early 2005. BHEL will also look after Operation and Maintenance (O&M) of the plant for ten years, post commissioning. The sewage treatment plant will have its own power plant which will be run by biogas, generated within the facility, making it self-sufficient and lowering operating costs. Larsen & Toubro: Visakhapatnam bulk water In Andhra Pradesh, work has started on the Visakhapatnam Industrial Water Supply Project. This is a 55.5km pipeline from the River Godavari to augment the 153km Yeleru Left Bank Canal. Some 15% of the output is going to domestic consumers. These are subsidised by Visakhapatnam Municipal Corporation for three years, charging Rs8 per m³ against an actual cost of Rs24 per m³. Larsen & Toubro has a 32 year concession for operating the pipeline, with equity financing from the municipality (Andhra Pradesh Industrial Infrastructure Corporation) and from the private sector; L&T Holdings and PSL Holdings, with a permitted return of 15% over the concession. Radius: Cancelled bulk water project In 1998, Raduis Water Company signed a 22 year BOT contract to deliver 4million L of water a day to a 23km industrial belt along the Seonath river in Chattisgarh state. The state wishes to terminate the contract, which was signed two years before Chattisgarh became a separate state from Madhya Pradesh (Source: GWR, 170, 2003). Some Rs250 million has been spent by Radius Water to date, but it is alleged that water demand is materially below what had been expected. In April 2003, the state of Chattisgarh cancelled the concession.

MAJOR CITIES Population 2000 2015 Status Agra 1,293,000 1,990,000 N/A Ahmedabad 4,427,000 6,612,000 Considering private sector involvement Allahbad 1,035,000 1,400,000 N/A Asanol 1,065,000 1,686,000 N/A Amristar 995,000 1,452,000 N/A Aurangabad 868,000 1,461,000 N/A Bangalore 5,567,000 8,391,000 Bulk water project under development Bhopal 1,425,000 2,148,000 N/A Bombay (Mumbai) 16,086,000 22,577,000 Political opposition to private sector for now Calcutta (Kolkata) 13,058,000 16,747,000 N/A Chandigarth 791,000 1,232,000 N/A Coimbatore 1,420,000 2,044,000 N/A Delhi 12,441,000 20,884,000 Considering water treatment proposals Dhanbad 1,046,000 1,497,000 N/A Durg-Bhilainagar 906,000 1,337,000 N/A Faridabad 1,018,000 1,977,000 N/A Ghaziabad 928,000 2,027,000 N/A Guwahati 797,000 1,230,000 N/A Gwalior 855,000 1,120,000 N/A Hubli-Dharwad 776,000 1,023,000 N/A Hyderabad 5,445,000 7,513,000 Bulk water scheme abandoned Indore 1,597,000 2,626,000 N/A Jabalpur 1,100,000 1,508,000 N/A Jaipur 2,259,000 3,860,000 N/A Jamshedpur 1,081,000 1,578,000 N/A Jodhpur 833,000 1,157,000 N/A Kanpur 2,641,000 3,826,000 N/A Kochi (Cochin) 1,340,000 1,721,000 Bulk water scheme abandoned Kozhikode (Calicut) 875,000 1,030,000 N/A



MAJOR CITIES Lucknow 2,221,000 3,312,000 N/A Ludhiana 1,368,000 2,011,000 N/A Madras 6,353,000 8,068,000 Considering private sector involvement Madurai 1,187,000 1,398,000 N/A Meerut 1,143,000 1,733,000 N/A Mysore 776,000 1,014,000 N/A Nagpur 2,089,000 2,902,000 Considering private sector involvement Nashik 1,117,000 1,997,000 N/A Patna 1,658,000 2,843,000 N/A Pune (Poona) 3,655,000 6,112,000 Bulk water scheme abandoned Rajkot 974,000 1,672,000 N/A Ranchi 844,000 1,312,000 N/A Solapur 853,000 1,330,000 N/A Srinagar 954,000 1,374,000 N/A Surat 2,699,000 5,715,000 N/A Thiruvananthapuram 885,000 1,018,000 N/A Tiruchchripalli 837,000 1,080,000 N/A Vadodara 1,465,000 2,127,000 N/A Varanasi (Benares) 1,199,000 1,522,000 N/A Vijayawada 999,000 1,294,000 N/A Viskhapatnam 1,309,000 1,974,000 N/A

International contract awards Ondeo Degremont: Water treatment BOT Ondeo Degremont gained a 10 year BOT contract for a 0.635million m3 per day treatment plant at Sonia Vihar in New Delhi in 2001. The contract is worth Rs 2 billion (€50 million). It is understood that the contract is now in operation. UUI: Tirupur bulk water BOT The Tirupur project is now in operation. The US$220 million BOT (including US$140 million in construction cost) water scheme, first proposed in 1994, aims to 0.185 million m3 per /day, two-thirds of which will go to supply about 1,000 Tirupur textile mills, the rest to domestic customers supplied through the municipal corporation. Industrial customers will pay Rs45 per m3 and domestic customers Rs5 per m³, replacing around 400 water tankers. The BOT is being operated by Mahindra Realty and Infrastructure Developers Ltd, and United Utilities International, with funding from a US$222 million rupee-denominated debt and equity package.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Tirupur 30 year bulk water BOT UUI Delhi 10 year water treatment BOT Ondeo Degremont Visakhapatnam 32 year bulk water concession Larsen & Toubro Alandur 10 year WWTW BOT First STP Chennai 10 year WWTW BOT BHEL

Private sector company operations (Please see the relevant company entry for details) Company Parent company Population served (country) Water Sewerage Total UUI United Utilities (UK) 600,000 0 600,000 Ondeo Degremont Suez (France) 1,000,000 0 1,000,000 Larsen & Toubro Larsen & Toubro (India) 500,000 0 500,000 First STP IVRCL (India) 0 100,000 100,000 BHEL BHEL (India) 0 100,000 100,000

Sources: Munjee, N. (2000). Privatisation of water & sewerage projects in India. Presentation to IBC, Financing of Water & Sewerage Projects, IMB, London. Narain, S (2002). Water & Wastewater International, 17 (2), 27-28. Global Water Report 185, December 2003, pp 103 Global Water Report 191, March 2004, p5

INDONESIA PART 2: COUNTRY ANALYSIS


INDONESIA Indonesia’s transformation into a stable, market oriented democracy remains a volatile process. All international involvement in privatisation projects during the Suharto era had to be carried out in partnership with one of his family’s companies. These stakes have been unwound, notably in the case of the two main Jakarta concessions, but the concerns about shifting allegiances remain. Nevertheless, the Jakarta contracts have proven to be robust in terms of their ability to meet political and economic instability. Water provision in most major cities is in a similar state to that of Jakarta, while sewerage and sewage treatment issues are just starting to be addressed.


Water resources and degradation Indonesia has abundant water resources along with rapid urbanisation and a minimal water provision and sewerage infrastructure. Water supplies to cities have been affected by catchment degradation, conflicts between urban and agricultural use, untreated sewage and the lack of regulation of the discharge of industrial effluents. Effluent discharge into river systems (m t/pa, 1993) Volume BOD Industry 900 1,349 Domestic 1,653 517 Total 2,533 1866

While there are significant groundwater resources available for urban areas, there is no reliable data as to how compromised these have been by excess abstraction, saline ingress and excreta contamination.


Urban water services Less than 50% of the population has access to safe water, falling to 30-50% in urban areas. Sewerage facilities serve only 5% of the urban population. There are 306 PDAMs (municipal water utilities), 60% serving less than 10,000 customers. Of samples taken in 1990, 40% showed contamination. Average distribution losses are 40%. Tariffs typically cover 70% of operating costs.

Urban Services Safe drinking water 36% l per cap per day 125 Access to sewerage 5% % sewage treated 0%

Politics and environmental legislation Prior to 1992, there was no functional national water policy. The Ministry of Public Works and the provincial governments are meant to be responsible for water laws. Two general water related Acts have been passed but these are seen as having little practical value. These are the Act of the Republic of Indonesia No 4 of 1982, concerning basic provision for the management of the living environment, and the Government Regulation of the Republic of Indonesia No 20 of 1990, concerning the control of water pollution. Environmental issues are now covered by Bapedal (Environmental Impact Management Agency), which is a non-ministerial government agency, reporting directly to the President. A programme to control the pollution of 24 main rivers in 1989 failed because there was no effective monitoring, while regulations concerning industrial effluent discharges are non-enforceable. The 1995-99 Repilita VI (Sixth Five Year Plan) allocated US$1.38 billion to urban and rural water provision, with the aim of reducing distribution losses to 25% for large towns/cities and 30% for medium and small towns. Water provision is to be improved for 22million people in urban areas, with 30,000 l/sec (946 million m³ pa) with 20,000



villages being connected, reaching 16.5million people in rural areas. With the exception of projects that have involved the private sector, economic and political factors are understood to have militated against these plans. In 1999, the anti-corruption law, Law 28/1999, was passed. This law provides the legal basis for the anti-corruption commission to require public officials in sensitive positions to declare their assets prior to assuming their posts and to agree to have their assets open to an official audit during and after their term. The Government has also formed several working groups to draft a presidential decree on im proved procurement procedures designed to improve the implementation of public projects. The Ministry of Settlement and Infrastructure’s water resource bill was passed in March 2004. It seeks to operate with water supplies regarded as a commercial good. Water requirements US$3 billion has been spent on urban water supply projects since 1970, but much of this money has been misappropriated. In 2001, water production was 91,000 l/sec.

Bulk water sales (l/sec) 1990 2010 Household taps 16,331 99,000 Public taps 916 4,000 Non domestic 7,008 83,000 Total sales 24,255 186,000 Available supply 52,000 248,000 Distribution losses 53% 25%

Indonesia’s proximate water provision needs have been estimated as requiring US$7.8 billion, with the majority of funding for medium and large cities coming from international agencies (for example the IFC and ADB) and the private sector. In the mid 1990s, the Government aimed for 80% of its urban population to have piped water at the household level by 2000. Likewise, in 1997, the Government stated that it sought to have 85-100% of households connected to suitable sanitation services by 2003 against 52% in 1996. Neither target has been met. The Government is currently seeking US$4 billion for current projects. The current rates of sewerage network development would reach the 85% target in 90 years, at a cost of 3 trillion Rupiah. Sewage treatment coverage

City Connections % coverage Bandung 90,000 20% Cireon 18,800 32% Jakarta 2,300 3% Medan 7,400 2% Surakata 8,000 13% Tangerang 9,800 4% Yogyakarta 10,100 10%

Source: Indonesia: Overview of Sanitation and Sewerage Experience and Policy Options; EASUR, World Bank, 2002. Currently, sewerage services access 0.49million people in Jakarta. In total, 0.7 million m ³ of effluent is discharged into the river network per day. Currently, just 3% of the city’s sewage is treated, or a total of 210,000 people. Golden Grid (New South Wales and Sydney Water) is seeking to develop a 25 year BOT. Currently 9% of the population has no facilities and 6% use communal blocks. Until the 2001 Water Pollution Control Regulation, wastewater from households was not defined as a water pollutant. Subsequently, municipalities have been made responsible for managing it.

Freshwater Total (1998, km3) 2,530.0 Per capita (1998, m3) 12,251 Withdrawals (1987, km3) 74.3 For domestic use (1987) 6% For industry (1987) 1% For agriculture (1987) 93%

Politics and privatisation Water privatisation was at first mooted to pay government debts as well as to alleviate water provision and pollution problems. In 1994-95, there was a belief that water and sewerage were not in the end going to be privatised, but severe flooding in Jakarta during 1996 brought matters to a head.



Some 27-30 BOT contracts have been under consideration since 1996. In general, these have been advancing slowly. Deregulation started to take place in 1994-95, after Government Regulation No. 20 opened the water sector to private investors. International companies are expected to carry out all necessary consulting and fieldwork before any proposals are submitted. To date, six BOT and concession awards have been made. The rate of progress has been slowed by political change, but it is anticipated that up to 10 more project awards can be expected to be made in the next five years. Currently, bulk water projects for Palembang, Bandung, Surabaya, Ujungpandang and Manado are being prepared for offer to the private sector. A total investment of US$314 million is needed for these projects.

Groundwater Total recharge (1998, km3) 226.0 Per capita (1998, m3) 1,094

MAJOR CITIES Population 2000 2015 Status Jakarta 11,018,000 17,268,000 Water services privatised (two sectors) Bandung 3,409,000 5,245,000 Under consideration for 2003 Surabaja 2,461,000 3,407,000 Under consideration since 1994 Medan 1,879,000 2,655,000 Bulk water provision privatised Ujung Pandang 1,051,000 1,552,000 N/A Palembang 1,422,000 2,200,000 N/A Malang 787,000 1,155,000 N/A Badar Lampung 915,000 1,595,000 N/A Semerang 787,000 969,000 Under consideration Tegal 762,000 1,186,000 N/A

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Jakarta (East) Privatisation of water provision services Thames Water Jakarta (West) Privatisation of water provision services Suez Medan 25 year water supply BOT Suez Sidoarjo 25 year water supply BOT VE/RWE Talang Kepala 20 year water concession Cascal Batam Island 25 year water concession Cascal

City Study: Jakarta Water and sewerage services are administered by Persuahaan Air Minuum Dki Jakarta (Pam Jaya), which in turn awarded 25 year water supply concessions to RWE/Thames (East Jakarta) and Suez (West Jakarta) in 1997. The contracts became operational in January 1998. In 1993, the city area’s population of 8,350,000 was served by 320,000 connections, with water available for 19 hours per day. All connected properties were metered, with distribution losses of 54%. The main water networks were constructed in the 1940s. Spending on infrastructure had collapsed in the 1960s as the Suharto regime diverted assets away from public spending. In 1993, 30% of the population received water supplies directly from Pam Jaya and 16% via public taps. Private wells and vendors supply the rest of the population. Under the 1997 privatisation plans, connections were set to rise to 70% by 2002, with all supplied by 2022, with 80% paying for these services. By 2002, the actual connection rate was only 50%. Even so, progress has concentrated upon low earning households:

Household connections 1997 2002 Total 505,000 610,000 Low income houses 25,500 59,230

Because of the effects of Suharto’s downfall and the Asian financial crisis in 1998, agreement on price rises has been deferred in exchange for capital spending deferrals. Suez has sought to extend its initial investment period from 5 to 10 years. PT PAM Lyonnaise Jaya has repaired 241km of pipes, reducing leakage from 65% to 52%, along with 230 miles of new pipes. The aim is to increase the customer base by 10% pa from the current level of 2.4million. Rates were increased in 1998 by 20%, 35% in 2001, 40% in 2003 and by 30% in 2004. A cross-subsidy system continues to be applied. By 2002, there were still approximately 40,000 illegal connections, due to water being provided by corrupt staff. Distribution losses had been reduced from 60% in 1997 to 49% by 2002. In return for the new rate increases, a stricter reporting regime will be put into place, along with new leakage reduction targets. To date, RWE has invested US$46 million in the East Jakarta concession and Suez art least US$50 million with the West Jakarta concession. However, water delivery in terms of quality and quantity appears to have failed to improve in the intended manner. This is partly due to the poor quality if water available to the concession



companies and in part because of financial constraints imposed by inflation since 1997. It is understood that RWE has been losing US$1 million a month for about two years, due to the delays in the tariff rebasing procedure.

Private sector company operations (Please see the relevant company entry for details) Company Parent company Population served (country) Water Sewerage Total Lyonnaise des Eaux Suez (France) 3,500,000 0 3,500,000 TWI RWE (Germany) 2,700,000 0 2,700,000 Generale des Eaux VE (France) 500,000 0 500,000 Cascal Biwater (UK)/Nuon (Ned) 540,000 0 540,000

Distribution losses in the main cities

PDAM Location/Province Leakage JAYA Jakarta 45% Kodya Bandung West Java 45% Kodya Semarang Central Java 39% Kodya Kediri East Java 26% Tirta Marta Yogyakarta 32% Halmahera Tengah Maluku 35% Tirta Monpase North Aceh 40% Tirta Musi Palembang, South Sumatra 37%

Major urban water authorities

PDAM Population Connections Population covered

PAM DKI JAYA, Jakarta 9,696,000 610,000 33% Kota Surabaya, East Java 2,864,100 256,637 45% Kota Bandung, West Java 2,613,292 141,435 28% Kota Semarang, Central Java 1,415,400 118,099 42% Kota Bogor, West Java 673,880 47,495 36% Tirta Marta, DI Yogyakarta 483,862 32,702 34% Nota Manado, North Sulawesi 441,900 31,666 36% Kodya Denpasar, Bali 390,410 49,208 63% Kota Cirebon, West Java 297,397 50,019 85% Kota Salatiga, Central Java 144,483 17,995 63% Kota Magelang 123,000 18,757 77% Kota Pare-Pare, South Sulawesi 115,900 10,926 48%

Sources: ADB (1999). Good governance and anticorruption: the road forward for Indonesia. Asian Development Bank, Consultative Group on Indonesia, July 1999. Seshagiri, G.V. (2001). Asia Water, 17 (11) p 6-10. ‘The riddle of Jakarta’ GWI, September 2004, pp 21-23.

IRAN PART 2: COUNTRY ANALYSIS


IRAN Most of Iran is arid or semi-arid, with annual rainfall averaging about 24cm, one-third the world average. The average rainfall in 96% of Iran's land area does not exceed 20cm pa. The rate of evaporation is correspondingly high. In Tehran, where the mean annual precipitation is 22cm, the potential evaporation is about 300cm, 13 times the rate of precipitation. Until recently, agriculture depended on the qanat system. This is an underground channel that conveys water from a highland aquifer to the surface at lower levels by gravity. Currently there are some 50,000 qanats in use, with a total output roughly equal to that of the Euphrates River. Since the 1960s, there has been a long term programme of dam building and well construction. The former Shah of Iran nationalised water resources in 1967, as the tenth point of the Revolution. Two National Plans running from 1969 to 1978 emphasised the importance of reservoir construction, with 27billion m3 of water held by dams by the end of 1978. Desalination was increased from 3million m3 pa to 23million m3 pa between 1974 and 1978.

The Ministry of Energy of the Islamic Republic of Iran co-ordinates the country’s water policies. The Regional Water and Wastewater Company carries out regional management. Drinking water quality standards are set by the Department of the Environment (DE). The DE also sets acceptable limits for all hazardous effluents discharged from sources. The main items of legislation include the Fair Water Distribution Act (1983), the Act of the Establishment of Water and Wastewater Companies (1984), the Environmental Protection and Enhancement Act (1974) and the Prevention of Water Pollution Regulation (1994). Major water and sewerage infrastructure projects have made relatively little headway since the 1979 Revolution. Political sensitivities have played a major role in this. For example, some US$200 million of World Bank loans for sewerage and healthcare projects were postponed in June 1999 after a crackdown on Jewish Iranians. These loans were originally drawn up in 1993 and were only reactivated in 2002. Iran is seeking to normalise its relations with most Western economies and water and wastewater infrastructure projects are of a non-contentious nature with regard to the mobilisation of international investment and management. Domestic consumption of water in large cities is approximately two hundred litres per capita per day; in small cities, the quantity is one hundred and eighty litres. There are fifteen sewage treatment plants operating in the country, along with about thirty units for recycling wastewater. In total, some 5% of urban sewerage is treated. The Tehran Sewerage Company (TSC) is developing a larger scheme to install a comprehensive sewerage network in Tehran. TSC is currently considering proposals for the laying of the US$44 million eastern main trunk line. TSC is implementing a city-wide sewerage and sewage treatment schem e. The first phase will cost US$340 million (US$145 million via the World Bank, US$195 million from TSC), includes a 450,000m 3 per day treatment plant to serve a population of 2.1million by 2006. Capacity will; be doubled in phase 2, for implementation between 2006 and 2011. In phases 3 to 5, the network will be expanded and an additional treatment plant will be built in south west Tehran to serve a population of 10.5m by 2029. During 2004, German companies gained €700 million in contracts, two wastewater treatment plants for Tehran (West & Northwest) and by 2005, contracts for further wastewater treatment plants, canal networks, long distance water transport pipelines and water supply plant.

IRAQ PART 2: COUNTRY ANALYSIS


IRAQ Iraq’s water and sewerage infrastructure has been one of the principal casualties of the Iraq war and continues to suffer from the resultant social and political fall-out. Access to potable piped water has decreased from 60% in March 2003 to 50% in 2004, with 9% of people connected to the sewerage system. According to the United Nations, water and sewerage systems repair and enhancement costs will be US$7 billion, including providing ‘universal’ (in other words, for those living in urban areas) access to potable water and 27% of the population with sewerage. To date, three major contracts have been signed, along with a series of smaller projects worth a total of up to $3.1 billion. This work was estimated to take two to three years after the Iraqi Ministry of Water Resources was handed over to local control in May 2004. The ministry's 2004 budget is US$150 million (€126 million) compared with US$1 million under Saddam. The first contract was awarded to Bechtel (USA) and Parsons (USA) and was financed by USAID in 2003. As part of the Iraq Infrastructure Reconstruction - Phase II, Bechtel’s US$1,030 million contract covers Baghdad and eight other cities. Bechtel will repair or upgrade a total of 19 water treatment facilities and restore 85% of Iraq’s total sewage treatment capacity. The project started this January and runs to December 2005. CH2M Hill (USA) & Parsons Water Infrastructure, Inc. also has a contract to provide support to the Public Works and Water Sector Program Management Office. In March 2004, a series of water and sanitation contracts were announced, financed by the $18.6 billion appropriated by Congress to rebuild Iraq's infrastructure. A joint venture between Washington International Inc (USA, 90%) and Black & Veatch (USA, 10%) was awarded a contract with a ceiling of US$600 million to rebuild the water sector. Later that month, FluorAmec (Flour of the USA, 51% and Amec of the UK, 49%) gained a US$1.1 billion contract to rehabilitate existing water systems and build new treatment and distribution plants. The contract also involves sewerage rehabilitation and constructing solid waste management systems in the north and south of Iraq. Secondary contracts worth up to a further US$400 million were also signed. In addition, Japan has committed $55 million for 30 small scale water treatment works in the Baghdad area and water and sewerage projects are expected to feature prominently in its $3.5 billion loan package. 77% of Iraqis lived in urban areas in 2000 and the latest data points to 22.5million people in Iraq in 2002. The only reliable water services assessment was carried out in 1996: Water and wastewater services in Iraq:

Water Sanitation WWTW Urban 96% 93% 27% Rural 48% 31% NA

Sources: WHO, USAID. WWTW data is for 2003 Access in these cases means public standpipes and wells as well as household piped water. There are 13 major sewage treatment works in Iraq, capable in theory of serving 5million people including three facilities that serve 3.8million people in Baghdad. In practice, a shortage of parts, chemicals and power means they are operating well at below capacity. While USAID guarantees dollar payments for its work, while the rest of the programme is likely to be financed through hard currency grants and loans. It is already evident that attacks on foreign nationals means that carrying out the work will be at best challenging. Privatising some of Iraq’s water services within a year is being considered by the authorities, but this will be subject to political sensitivities. USAID completed the rehabilitation of the Sweet Water Canal reservoir and distribution system in Basrah in June 2004 for US$38 million (€31.8 million). A US$11 million pilot project to restore parts of Iraq’s southern marshlands has been launched by the UN Environment Programme. It aims to provide potable water and effective sanitation for 80,000 of the Marsh Arabs.

IRELAND PART 2: COUNTRY ANALYSIS


IRELAND Water and sewerage provision in Ireland is caught between the rock of a tradition of free water provision and the hard place of EU compliance costs at a time when structural and cohesion funding is being re-directed towards central and eastern Europe. With the Private Finance Initiative (PFI) scheme being extended to Northern Ireland, the progress of the PFI is being closely followed in Ireland.


Service provision and management In urban areas, water supply systems are public utilities, owned, operated and maintained by City and Town councils. Rural water supplies are also organised into Group Schemes, which are relatively small-scale co-operative water systems, developed, operated and maintained by user groups. There are also very many individual supplies to single dwellings and industrial enterprises in rural areas. The water supply pipe network and reservoir system are owned, operated and maintained by the local authorities, except for the small-scale group schemes, which are in private ownership. The public water supply system reaches 81% of the population at present while group schemes supply about 10%. Distribution losses in 2000 were 47%. In June 2001, changes were announced to the Urban Waste Water Treatment Regulations to require a higher level of treatment for discharges into the 30 water bodies. The designation of 12 stretches of river, 3 lakes and 15 estuaries as sensitive areas makes the provision of nutrient reduction facilities, or tertiary treatment, compulsory for discharges from large sewage treatment plants. Nutrient reduction facilities have been installed in the appropriate waste water treatment plants in the 10 sensitive areas designated in 1994 and are already in place in a number of the areas now being designated.

Population Total 2002, million 3.9 Total 2015, million 4.4 In urban areas 2002 60% In urban areas 2015 64% In urban agglomerations 2015 26%

Water quality Inland water quality (1988-90)

Ia-Ib Good/Very Good 70% II Fair 16% III Poor 12% IV Bad 1%

The relatively low level of industrialisation means that the influence of intensive agriculture is higher than usual. In 1989 after research to identify the impact of agriculture on water quality, it was found that 20% of noted water pollution incidents resulted from agriculture. Nitrate levels for surface waters and aquifers are within EU standards. Irish surface waters contain a relative low level of nitrate, there is also little contamination with metals and pesticides. 75% of public water supply stems from surface water. While groundwater resources are generally unpolluted, the fissured nature of the limestone aquifers means that pollutants can move through them relatively rapidly. This, combined with the shallowness could cause problems in the future. In 1988, 25% of the population effluent was subjected to treatment. There were 530 sewage treatment works in 1988, of which 2 serve cities with a population in excess of 100,000.



Population served 1990 1995 1999 Tertiary 0% 1.8% NA Secondary 21% 31.8% 26% Primary 23% 24.0% 35%

IRELAND PART 2: COUNTRY ANALYSIS


Population served 1990 1995 1999 None 22% 10.4% 39% Not connected 34% 32.0% NA

Spending needs Compliance with the UWWTD means that Ireland needs a 4.1million population equivalent (PE) sewerage system by 2005. €533 million is being spent on rural water between 2000–06. 665 sewage schemes are also being implemented: 50 have been completed; 186 between 2002-04; 129 from 2005; and 240 rural schemes. Spending on sewage and water between 2002-04 will be €726 million. In total, some €4.4 billion is required. Ireland 88 sanitary authorities, with 12 planning to charge for industrial effluent discharges. The main STW, Ringsend in Dublin, will have a 1.57 million PE. The Irish government will spend €100 million on bringing rural water supplies up to an appropriate standard in 2004, a 50% increase on funds planned for 2003. County councils are to receive €78 million; €5 million will go to the single house well grant; €7 million will be for subsidies for group water schemes; €4 million for pilots of new wastewater treatment systems for small villages.


Paying for water services Ireland is the only country in the EU that does not charge for domestic water on a universal basis. This has traditionally been left to the discretion of local authorities. This has meant that poorer (usually rural) municipalities imposed charges, while cities such as Dublin and Limerick did not. In the mid 1990s, an attempt to impose uniform charges backfired and as a result, the Local Government Act of 1997 abolished domestic water charges. The EU has responded by cutting Cohesion finance for water projects since 2000: the EU allocated €1.1 billion under the Cohesion Fund for the environment in Ireland for 1993-02. The EU maintains that the polluter pays principle, along with the need for cost recovery for compliance work up to 2010, and has warned that future aid allocations may be cut if Ireland continues to block domestic charges for water. In addition, the EU wants water metering to be introduced for domes tic customers.


MAJOR CITIES Population 2000 2015 Status Dublin 985,000 1,149,000 Sewage treatment privatised in 2000

The UK Government's Treasury Taskforce for PFI is being used as a model by the Government of the Republic of Ireland to develop public private partnerships for major infrastructure projects. A central unit is being created in Ireland's department of finance to launch a number of pilot projects for roads and other schemes. It will involve private-sector expertise in design and operation, and may bring in private money. After 2000-03, Ireland is set to lose large amounts of European Union Cohesion and Structural funds. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Cork 22 year sewage treatment BOT Northumbrian Dublin 20 year sewage treatm ent BOT AWI consortium Sligo 10 year water O&M AWI consortium Private sector company operations (Please see the relevant company entry for details)


Northumbrian NWG (UK) 0 220,000 220,000 AWI AWG (UK) 50,000 1,200,000 1,250,000

ISRAEL - PALESTINE PART 2: COUNTRY ANALYSIS


ISRAEL - PALESTINE Political sensitivities drive all aspects of water provision and use in Israel and Palestine. The need to defer to special interest groups has also precluded the provision of water services on an economic basis in many areas. There were some encouraging signs regarding the resolution of international disputes over water resources, but these have been superseded by politics. On all sides, a shift away from agriculture towards higher value uses of water is needed.

Economics (2002) GDP per capita US$15,792 GDP per capita (PPP) US$19,530 GDP per capita (Palestine) US$1,051

Water in Israel Israel is one of the leaders in recycling wastewater. At the beginning of the 1990s, 90% of domestic and industrial users were connected to the sewerage network and 70% of the water collected was reused, accounting for 195 million m3 pa of water, or about 10% of total supply. By 1998, this had increased to 250million m3 pa and Israel is currently planning to increase the recovery of wastewater to up to 400million m3 pa. Water provision and use in Israel (1992-93)

Domestic use (L/day) 275 Agriculture 63% Industry 6% Domestic 31% Total (million m 3) 1,754

Fresh water in all areas of Israel will be restricted to domestic use by 2014. The increased cost of land and labour is driving the profitability of irrigation agriculture down. This is creating considerable potential for mutual aid between the two states with Palestine taking over the commodity side of food production and Israel concentrating on higher value activities such as seeds and support services. US$1.7 billion will be invested in desalination and related water projects between 2003 and 2007. US$360 million will be invested in small desalination facilities to be built by private companies, along with US$620 million for larger facilities at Ashkelon, Hadera and Ashdod. US$180 million is to be invested in wastewater reclamation facilities, along with US$240 million from private companies.

Israel: Population 2002 (million) 6.3 2015 (million) 7.8 Urbanisation in 2002 92% Urbanisation by 2015 92% In urban agglomerations, 2015 35%

Palestine: Population 2002 (million) 3.4 2015 (million) 5.3 Urbanisation in 2002 71% Urbanisation by 2015 76% In urban agglomerations, 2015 0%

The West Bank and the Gaza Strip Water development and management projects in the West Bank and the Gaza strip to date have been related to aid spending or World Bank supported schemes. US$75 million in aid was granted in 2003 to alleviate water supply shortages the Southern West Bank, via the World Bank, the United States Agency for International Development (USAID) and the French Development Agency (AFD). USIAD work has been frozen due to the intensification of the conflict. Gaza II, an eight-year contract to supervise, manage and maintain the water and wastewater system in the Gaza Strip is to be awarded in the near term having been postponed from 2001 by the Palestinian Intifada. Gaza I, the US$28 million, four-year water and wastewater management contract won in July 1996 by Suez saw revenue collection double and leakage fall from 50% to 31%. Suez’s management replaced 8,000 meters and repaired a further 7,000 meters The Palestinian Water Authority’s National Water Plan highlights investment needs of US$1.5 billion in the Gaza strip and US$3.5 billion in the West Bank over the next 20 years.



Water provision and use in the West Bank/Gaza (1990-92) Domestic use (L/day) 57 Agriculture 62% Industry/Domestic 38% Total (million m3) 210

In 1999, the European Investment Bank loaned €30 million in a €65 million package for developing water resources for the cities of Hebron and Bethlehem in the West Bank. 250,000 people will be served by the work, aimed at improving service and cutting distribution losses, with the work meant to be completed by 2002. In relation to this, a four year management contract for the two cities has been awarded to VE and will have a turnover of €6.4 million over the contract life.


Conflict study: Israel, Jordan and Syria Israel, Jordan and Syria occupy one of the three most arid, permanently settled areas in the world. They are unique in that their relatively poor groundwater resources and petrochemical deposits mean that surface water resources have to form the backbone of the water supply. The increase in water demands placed on these resources have been exacerbated by population growth, immigration, refugee flows and the insistence by various parties on using irrigated agriculture. The Lebanon is also a party to these regional concerns, but has enough rainfall to be self sufficient in water resources. The estimated total renewable water supply for the region is approximately 2,400million m3 pa, while water use averages 3,000million m3 pa, according to a 1998 study compiled by the U.S. Geological Survey. The resulting deficit is met by extracting water, without recharge, from groundwater sources and underground aquifers.

Freshwater Annual availability (1998) 1.70km 3 Per capita 289m 3 Annual withdrawal (1989) 1.85km 3 Domestic 16% Industrial 5% Agriculture 79%

Water resources, their use and abuse The Jordan River basin drains an area of 18,300km 2 and is some 230km long. The total natural discharge of the basin averages around 1,500million m3 pa. The Upper Jordan, which forms the axis of the northern part of the system, has three sources, the Dan (250million m3 pa), Hasbani (125mill ion m3 pa), and Banias (125million m3 pa). The Dan is within Israel, the Hasbani rises in Southern Lebanon, and the Banias rises on the Golan Heights, which belonged to Syria until 1967 and are now under Israeli control. The Yarmouk (400-550million m3 pa) rises in Syria, then the river flows along the Syrian-Jordanian border, and into Israel before converging into the Jordan River. The Lower Jordan forms the border between Jordan and Israel and then between Jordan and the West Bank. Some 400-500million m 3 pa is discharged into the river through a number of smaller tributaries in Jordan. Water usage in the two main rivers (1990s, million m3 pa)

Upper Jordan Yarmouk River Israel 550 70-100 Jordan 0 120-130 Syria 0 150-240 Lebanon 0 N/A West Bank 0 0

Israel and Syria have extensively exploited these rivers in recent years. Israel’s National Water Carrier was conveying 420-450million m3 pa in the 1980s, which, along with direct water extractions in the Upper Jordan Valley and on the shores of Lake Tiberias accounts for effectively the whole discharge of the river in its northern section. Financial and political pressures have restricted Jordan’s exploitation to 120-130million m3 pa from the Yarmouk. Israel in turn pumps some 70million m3 pa from the Yarmouk while Syria takes between 200-250million m3 pa from this river. The natural discharge of the river was 1,300million m3 pa. Israel allows a flow downstream from Lake Tiberias of 60million m3 pa (about 10% of the natural discharge in this section), along with the remaining Yarmouk waters, and some irrigation return flows, and winter runoff, a total of 200-300million m3 pa. This water is unsuitable for irrigation because of its high salinity and other pollution. The West Bank aquifer (also called the Mountain Aquifer) delivers 600-900million m3 pa of water with a safe yield of 632million m3 pa. Most of the aquifers and the



rain recharge arise in the West Bank and are transboundary in nature. Historically, use of the western aquifer by the local Palestinian population was limited to part of the flow of springs as well as some 20million m3 from traditional dug wells in the coastal area. Water usage in the West Bank (million m3 pa)

Israel 413 Settlers 110 Palestinians 50 Unallocated 58

Groundwater Annual availability (1998) 1.10km 3 Per capita 187m 3 Annual withdrawal (1986) 1.20km 3

Politics and practicalities All water disputes in the region revolve round perceptions of water and power. Any projects that are seen as possibly strengthening one side have traditionally been opposed by the others or their allies. United Nations vetoes have been used to block World Bank funding for water provision schemes in Jordan, while in the 1960s and 1970s, military raids were carried out on dams. The 1955 Johnson Plan for water allocation is often invoked by Jordan and Syria, but it does not recognise the realities after the 1967 war. Water allocation has been one of the core areas for debate during the current peace process. The Via Maris Desalination and Carmel Desalination groups have won BOT contracts to build two desalination plants for US$140 million. Each group will construct a desalination plant capable of purifying 30million m3 of water a year. The plants will be built under a BOT basis, at a cost of US$70 million each. At US$0.54 per m3, Via Maris offered the lowest price per cubic metre. The Via Maris group is made up of Tahal Consulting Engineers, Granite Hacarmel, Middle East Tubes and Ocean Advanced Industries. Carmel, which is composed of Ionics (USA), Baran and Dor Chemicals, plans to build its plant in Haifa Bay. A US$120 million, 100million m3 pa desalination facility to be located in Caesarea is under consideration.

MAJOR CITIES City 2000 2015 Status Tel Aviv 2,001,000 2,392,000 No privatisation plans at present

Private sector developments Israel’s water industry was liberalised in 2003. The Water Commission issued regulations that require the state-owned Mekorot Water Company to purchase brackish water desalinated by private producers. Mekorot has agreed to purchase 8.5million m3 of water annually from a JV between kibbutz Maagan Michael on the Mediterranean coast and Ionics at US$0.35 per m3, 30% below the cost of water from Veolia’s Ashkelon plant, reflecting the lower of desalinating brackish water. The potential for brackish water development is estimated at 180million m 3 pa. Licenses for setting up independent water and sewage companies were first awarded in 2003, the first two being to Rishon Le Zion and Metullah. The intention is to allow these entities to be privatized at a later date. Jerusalem, Haifa, Ashdod and Petah Tikva are also setting up municipal water and sewage companies.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Ashkelon 25 year, water desalination BOT VE

Israel has been developing a series of desalination projects but it became evident in 2004 that these were facing various difficulties. The original target was for 315million m3 of desalinated water by 2006 but this level is now unlikely to be reached before 2009. Production in 2006 is likely to be in the region of 160million m3. The only project performing to expectations is VE’s.

Private sector company operations (Please see the relevant company entry for details) Population served Company Parent company (country) Water Sewerage Total

VE VE (France) 700,000 0 700,000 Export of water from Turkey to Israel Negotiations have been underway between Turkey and Israel since 2003 concerning the export of water from Turkey’s Manavgat River dam to Israel. It is understood that the contract covers 50million m3 of water per annum and will last 20 years. The water will either be transferred by tanker or via a pipeline. It is understood that Turkey



will take sole responsibility for the marketing and sale of Manavgat water in Israel, with Israel taking responsibility for transportation. The Manavgat Estuary is 325 nautical miles from Ashkelon, the nearest Israeli port. The dam cost Turkey US$160 million to construct and is capable of supplying potable water at 5.8m 3 per second. A US$150 million pumping station and treatment plant entered service in 1999. Turkey is seeking to export water from the dam to a number of markets including Greek Islands in the Aegean, Cyprus and other (as yet unnamed) Middle Eastern countries and hopes to eventually sell 0.5million m3 of water per day, or 182.5million m3 of water per annum. No negotiations between Turkey and countries other than Israel have been disclos ed to date. According to the Israeli Government (GWR, October 2003), the cost of water exported to Turkey would break down as follows:

Cost of water in Turkey US$0.20 per m3 Cost of piping water to Israel US$0.70 per m3 Cost of transfer to local network US$0.10 per m3 Total cost US$1.00 per m3

ITALY PART 2: COUNTRY ANALYSIS


ITALY Since 1999, the 1994 Galli Law has been increasingly important, seeking to rationalise the management of Italy’s water and sewerage services and to encourage private sector management and investment. While legal issues as to the award process abound, the implementation process has progressed at a remarkable rate.

Economics (2002) GDP per capita US$20,528 GDP per capita (PPP) US$26,40 Agriculture (1994) 3% Industry (1994) 26% Services (1994) 71%

Water quality According to the 1991-93 survey of the 13 main rivers from a total of 156 survey sites taken from the national network of the National Information System on the Environment (SINA), river quality in Italy is as follows:

I-II: Good – Fair 50% III: Polluted 32% IV: Very Polluted 9% V: Heavily Polluted 9%

The Rivers Po, Tiber, Adige and Arno account for 40% of Italy’s fresh water resources, with their basins covering 35% of the surface area and 45% of the population. These four rivers are all of poor or bad quality. The water quality in natural and man-made lakes is generally poor. This phenomenon is particularly evident in Sardinia, where 40% of the capacity is subject to frequent algal blooms, and Sicily, where 51% of the waters are considered to be suffering from some degree of eutrophication. The population equivalent generated by residents, commercial and industrial users and tourists is of 99million people. 70% of the overall pollution load is subject to treatment. 80% of the industrial effluent generation is concentrated in the Paduan basin. Groundwater problems are mainly caused by the intensive use of herbicides and fertilisers. Problems remain in different areas of the country with regards to the presence of nitrates in drinking water, saline intrusions into underground coastal aquifers and the problem of the presence of organic synthetic compounds such as organic chlorinates. Excess levels of nitrates in drinking water are a particular problem in Tuscany, the Marches and Campania, significantly affecting water supplies for 0.67million people. Saline intrusion into coastal aquifers in Romagna, Puglia and Sicily is also of concern. Organic compounds are at a high level in the Po Valley, Brescia, Vicenza, Padua and La Specia. Algal blooms continue to be a problem in the Upper Adriatic Sea due to the discharge of untreated effluents mainly into the river Po. According to official returns, most of the beaches meet guideline as well as mandatory standards.


Infrastructure and service provision National gross water supply

Billion m³ Per capita 1961 5.2 297 L/day 1975 5.8 324 L/day 1998 6.8 352 L/day 2015 10.6 548 L/day

There was an average abstraction of 324L per day in 1975, with an average water supply of 174L per day to domestic users. Urban areas have a higher than average usage: Rome; 243L per day, Milan; 300L per day and Turin; 310L per day. Access to sewerage rose from 30% in 1980 to 62% in 1987 and 80% by 1995. The proportion of domestic sewage subject to treatment was 14% in 1971, rising to 30% in 1980, 45% in 1987 and 62% by 1995. According to Veolia Environnement (VE) in 1995, some 35% of sewage treatment works were working below par or were in fact not in operation.



Sewage treatment development

Year 1995 1999 Tertiary 5% 24% Secondary 34% 36% Primary 17% 3%

1998-08 spending is forecast at €31-51 billion although the Public Works Ministry's slower programme is for €41-51 billion for 15-20 years. A survey by Itstat in 2004 found that 1,165 of Italy’s 7,988 Comuni still have no sewage treatment works, with 112 of these lacking a sewerage system. Only one of the six cities with a population over 0.5million has an effective sewage treatment while nearly half of Comuni with a population of 10-80,000 have inadequate sewage treatment or sewerage. Regional water scarcity 25% of the overall population has inadequate water resources. While in the north of Italy, 8.5% of the population does not have sufficient amounts of water, this rises to 18% in central Italy, 55% on the islands, and 78% in the south. These areas are considered to be under the threat of supply disruptions in drought years. Therefore, the Italian Parliament is currently examining a law proposing the reorganisation of the National Water Network with special emphasis on supplying the southern parts of Italy. In total, 9.161million people are in areas of regular water stress. In 1995, 55% of people in Sardinia faced occasional water shortages.

Urban Services % Water 98% L per cap per day 300 % Sewerage 90% % Sewage treated 85%

Structure of the water market Water supply in Italy is managed by a total of 8,075 municipal administrations, which work either individually or in association with other municipalities. Exceptions are three public utilities (Apulian, Sicilian and Sardinian), which operate large facilities for the abstraction and distribution of water. According to the figures of the association of Italian public water and gas utilities, 55% of the water is supplied by 184 municipal or co-operative waterworks and the remaining 45% is in the hands of 5,896 different public bodies. Water and serwerage entities, 2002

Water supply 5,500 Water distribution 6,200 Sewerage 7,000 Sewage treatment 2,000

Italy’s 300 state held municipal service entities have an estimated total value of Lira 50,000 billion. These assets are mainly in water, sewerage, gas and energy services. A quasi market for these activities has been developing in recent years because of the need for credit ratings to raise new debt issues. At the same time, for water and wastewater services, there has been increased political pressure to keep prices down in recent years.


The 1994 Galli Law The Galli Law is designed to address the inadequacies of the current operational structure in Italy when faced with a €25 billion ten year bill for basic EU compliance work. The Law seeks to rationalise various water entities into 91 more manageable entities, with the aim of these then combining water provision and sewerage. One of the central elements for attaining this is to allow the former municipal water utilities to expand their services into other regions of Italy. The Galli Law started to make an impact in 1999, when the first direct concession award (Arezzo by Suez and Amga) took place. A secondary driver has been the opening up of gas and electricity markets to competition, eliminating the scope for cross-subsidies between these activities and water and sewerage services.



Market structure 1995 2000 2003 Private sector 3% 8% 11% ENI 4% 11% 10% Municipal stake sales 0% 6% 18% Moving towards privatisation 1% 9% 8% Municipal entities 92% 66% 53%

Given that in 1995, the municipal share of the market was more than 87%, the Galli Law has clearly assisted the development of private sector participation on a broader basis. The Finance Bill of 2002 has thrown some aspects of the ATO system into confusion and will probably need to be amended. Under the Law, municipally owned water and wastewater companies are only to be allowed to develop their activities outside their ATOs between 2003 and 2007.

Groundwater Total recharge (1998, km3) 30.0 Per capita (1998, m3) 524 Withdrawals (1985, km3) 12.0 For Domestic use (1985) 53% For Industry (1985) 13% For Agriculture (1985) 34%

Market size and development In 2001, total billings generated €3.0 billion. This is expected to rise to €5.0 billion by 2010 due to a programme of tariff increases since 1994. Average tariffs of €0.85 per m 3 in 2002 will rise to €1.19 per m 3 by 2010. Privatisation developments Genoa SpA (Amga) was partially floated in 1996, along with Rome’s ACEA and Como’s ASCM, Trieste’s Acegas and Brescia’s ASM. These municipalities have been lowering their stakes over time. ACEA’s Acqua Italia has started rationalising water services in Genoa after acquiring the smaller companies serving the city. A second wave of ATO IPOs and mergers is gathering momentum. Preparations for the privatisation of Acquedotto Pugliese (AP) are underway after four years of delays. The Apulia region holds 87.2% of AP’s capital, while 12.8% belongs to Basilicata. AP serves more than four million people. Enel has been seeking to acquire AP since 2000.

MAJOR CITIES Population 2000 2015 Status Milan 4,251,000 4,251,000 Corporatised, preparing for a partial float Naples 3,012,000 3,012,000 Stake in Arin SpA sold to Italgas in 2000 Rome 2,649,000 2,649,000 49% of ACEA floated Turin 1,294,000 1,294,000 Corporatised, preparing for a partial float Genoa 890,000 890,000 49% of AMGA floated Florence 778,000 778,000 Partly privatised

Entity 2001 revenues

(€million) Supply (m m3 pa)

Population Served

Municipalities Served

AQP, Puglia & Basilicata (public) 346 244 4,345,000 338 ACEA, Rome (semi private) 248 385 3,000,000 66 Italgas/ENI 119 342 2,020,000 283 CAP, Milan, Lodi & Pavia (public) 85 220 1,650,000 194 AAM, Turin (public) 52 161 1,243,000 38 Hera, Bologna (semi-private) 52 74 764,000 47 AMGA, Genoa (semi-private) 45 41 760,000 90

Private sector contracts awarded (Please see the relevant company entry for details)

Location Contract Company Arezzo 25 year concession award Suez/Amga Asti 30 year water and wastewater concession Amga Bologna 44% sale of Hera Spa in 2003 Hera Brescia 25% stake sale of ASM Brescia in 2002 ASM Brescia Calabria 30 year water and sewerage concession So Ri Cal Como 49% stake sale of ASCM in 2000 ASCM Como Florence 35 year concession award ACEA/Suez Frosinone 30 year water and wastewater concession Acea Genoa 49% stake sale of Amga in 1996 Amga Spa



Latina 30 year water and wastewater concession VE/Enel Massa Water and sewerage concession Camuzzi Modena 22% sale of Meta Modena Spa in 2003 Meta Modena Naples JV for water services Italgas Perugia 30 year concession award SAUR Pisa 30 year concession award ACEA/Suez Pavoda & Vicenza ATO merger Acegas Rome 49% stake sale of ACEA in 1999 ACEA Spa Siena/Grosetto 25 year concession award ACEA/Suez Terni 30 year water and wastewater concession Severn Trent Trieste 49% stake sale of Acegas, 2001 Acegas Vercelli Acquisition of Atena ATO Amga

ATO development A total of 91 ATOs have been set up, mostly since 2000-02. The Italian Government is currently considering if the tender processes for the granting of ATO licences was properly carried out. The Environment Minis try is considering revoking various ATO concessions, most notably ACEA’s. In the meantime, seven ATOs have been floated and have in turn merged with 14 other ATOs, with further mergers under consideration.


Water Sewerage Total ACEA Rome Municipality (Italy) 6,770,000 6,170,000 6,770,000 Acegas Trieste Municipality (Italy) 575,000 110,000 575,000 Acque Genova Amga (Italy) 440,000 815,000 860,000 ASCM Como Como municipality (Italy) 250,000 0 250,000 Acquedotto Ferrari ACEA (Italy) 350,000 0 350,000 Acquedotto Nicolay ACEA (Italy) 330,000 0 330,000 Acque Potabili ENI (Italy) 950,000 0 950,000 Amga Genova municipality (Italy) 1,350,000 1,400,000 1,700,000 ASM Brescia municipality (Italy) 513,000 434,000 513,000 Hera Bologna and other towns (Italy) 2,000,000 1,700,000 2,000,000 Camuzzi Enel (Italy) 44,000 30,000 44,000 Meta Modena municipality (Italy) 312,000 324,000 324,000 Gruppo Italgas ENI (Italy) 5,940,000 0 5,940,000 Siemec VE (France) 0 700,000 700,000 Sigesa Bouygues (France) 1,200,000 2,450,000 2,800,000 Crea Suez (France) 700,000 700,000 700,000 SAP VE (France) 95,000 0 95,000 Acque Toscane Suez (France) 40,000 40,000 40,000 CGA VE (France) 345,000 0 345,000 Severn Trent Services Severn Trent (UK) 600,000 600,000 600,000 Latina VE (France)/Enel (Italy) 600,000 600,000 600,000 So Ri Cal Enel (Italy) 752,000 752,000 752,000 Nuove Aqua Suez (France)/Amga (Italy) 296,000 105,000 296,000

JAPAN PART 2: COUNTRY ANALYSIS


JAPAN The insular nature of the market in Japan has meant that Japanese companies have a remarkably low international profile. The only significant contract gains have been made as part of JVs with the more established players. Japan’s debt mountain is forcing a reassessment of the role of the private sector in the domestic market and may see international players entering in due course.


Legislation and management Water management is guided by the 1958 Water Works Act (amended 2001). The Water Pollution Control Law passed in 1960 allows for the monitoring of and enforcement of standards relating to the discharge and treatment of household and industrial effluents. The Basic Environment Law passed in 1993, defines government responsibilities and overall aims for environmental protection, which were incorporated into the 1994 Basic Environment Plan. This plan sets out a series of targets for water and effluent treatment and the expansion and upgrading of Japan’s sewerage and sewage treatment network. The Law for the Preservation of Drinking Water Supply Quality in Headwaters was passed in 1994. The Japanese Environment Agency is mainly concerned with pollution monitoring and carrying out research work. In 1995, domestic water tariffs accounted for 90.2% of service provision costs. In theory, water services to agriculture are self financing, but the payments do not cover all actual costs, with sewerage fees acounting on average for only 60% of costs. Water and sewerage services turnover in 2000 was ¥5,600 billion (US$45 billion), with capital spending of ¥6,500 billion (US$52 billion) making Japan the largest water market in the world. This implies that there is a deficit of US$7 billion per annum purely in capital spending terms. An average bill of US$360 per capita also implies that there is significant scope for efficiency gains.

Population 2002 (million) 127.5 2015 (million) 127.2 Urbanisation by 2001 79% Urbanisation by 2015 82% In urban agglomerations, 2015 39%

Water supply entities

Size of System Number People served 500,000+ 21 39,720,000

100,000-500,000 183 37,850,000 20,000-100,000 613 26,230,000

5,000-20,000 1,131 11,200,000 Below 5,000 9,370 6,650,000

Water supply entity Number Public 11,127 Private (100+ people) 3,784 Bulk water 110

In addition, there are 4,760 sewerage and sewage treatment systems, ranging from river basin systems to rural schemes.



Year 1984 1987 1990 1996 Tertiary 0% 0% 2% 8% Secondary 30% 36% 42% 50% Primary 9% 0% 0% 0%



Infrastructure development Nationally, 95.5% of people are connected to piped water supply. The low level of sewerage in Japan (54% in 1995) marks the country from the rest of the industrialised world. In the 13 major cities , 96% were connected to sewerage, compared with 42% for the rest of Japan. Septic tanks for example, remained commonplace in Tokyo until the 1980s. As much of the water and sewerage network has been developed since the 1960s, it is generally in good condition.

1978 1988 1993 Flush lavatories 46% 66% 76% Sewerage 31% 39% 47%

The 8th Five Year Plan for Sewerage Construction ran from 1996 to 2000, and aimed to lay the foundations for a modern sewerage and sewage treatment infrastructure.

1995 2000 2010 Connected to sewerage 54% 66% 90% Effluents recycled 27% 35% 60% Tertiary treatment 4% 12% 90%

By 2002, sewerage coverage was 70%. Capital spending on sewerage in recent years has averaged ¥3,400 billion pa (US$2.7 billion), 60% of sewerage and 30% on wastewater treatment works. The water supply extension programme has been budgeted at ¥1,900 billion. When including industrial effluents, 62% of wastewater was treated in 1995.

Freshwater Annual availability (1998) 547.0km 3 Per capita 4,344.0m3 Annual withdrawal (1990) 91.4km 3 Domestic (1987) 19% Industrial (1987) 17% Agriculture (1987) 64%

Environmental and service shortfalls Since 1995, Tokyo has been experiencing water shortages both in late summer and during the winter. This is due to inadequate water storage and distribution facilities in the region.

River water quality 1989 1991 1996 Good-Fair 69% 75% 74%

In 1997, bathing and coastal waters were at their lowest quality since the 1970s, with a fall in the quality of lakes also noted. Eutrophication in service reservoirs has affected drinking water supplied to 14million people in recent years.

Groundwater Annual availability (1998) 185.0km3 Per capita 1,469m 3 Annual withdrawal (1990) 13km3 Domestic (1987) 29% Industrial (1987) 41% Agriculture (1987) 30%

Privatisation and private sector players The traditional resistance towards privatising Japan’s water or sewerage services and its reticence towards foreign companies is being eroded by the country’s mounting debt problems and the need to make water and sewerage services cover their costs. Another factor has been the lack of impact that Japanese companies have, in consequence, made in the privatisation of water and sewerage services globally. The only cases where they have been noted are as equity partners in extant consortia. For example, Mitsubishi holds 5% of the United Utilities consortium serving eastern Manila and is AWG partner for the Beijing No 10 water BOT. Marubeni also has a JV with VE for a variety of projects in China and other East Asian economies. Marubeni is Vivendi’s JV partner for the Chengdu BOT water supply project in China. Mitsui and Sumitomo both have a 7.5% stake in Thames Water’s Izmit project in Turkey. While all urban water and sewerage services are in municipal hands, a degree of O&M outsourcing for sewage treatment works has been in place since 1953. It is not privatised in the conventional sense, but through a series of one year management outsourcing contracts. The sewage treatment O&M market was worth US$4 billion pa in 1997, of which US$1billion pa was operated by private sector operators.



Market breakdown for sewage treatment O&M in public and river basin sewage systems

Municipal operators 38% Ebara 10% Nihon HELS Industry 21% Other private operators 31%

According to industry sources in Japan, this market is expected to grow by 50% in the medium term. Since 1999 three developments have made the rest of the sector more attractive to the private sector. In 1999, legislation was passed allowing the use of private finance in water and sewerage projects, although to date this has in reality been limited to the use of PFI projects for their design and build capabilities. In 2000, legislation was introduced to encourage the consolidation of water and sewerage entities to improve their cost effectiveness. This has subsequently evolved to allow one city to operate another city’s services. In 2001, guidelines were introduced to encourage multi year O&M contracts at sewage treatment works. In consequence, strategic alliances are being developed in anticipation of the opening up of the rest of the Japanese market:

Japan Water Nihon HELS/Mitsubishi J-Team Ebara/Nippon Jogesuiodo Sekki Co Hitachi Public Services Hitachi Marubeni Vivendi Marubeni/Vivendi Thames Water Japan RWE/Mitsui

There is much more private sector involvement in industrial water services than for municipal water services. Sumitomo Metal has been operating a 155,000m3 per day industrial WTP at Wakayama since 2002 and in March this year. A 5.5 year O&M contract for Geihoku, a town of 3,000 people is the first medium term PSP contract in Japan. Geihoku’s nine water supply systems are now operated by J-Team, a venture between Ebara and Nippon Jogesuiodo Sekkei (NJS) a water consultant. In November 2002, Japan Water, a 50:50 JV between Mitsubishi and Nihon HELS, Japan’s largest sewage treatment operations company, won the first O&M contract for water services for the city of Miyoshi (population 40,000). Japan Water will operate the city’s water treatment and distribution infrastructure for 5.5 years. In Saitama prefecture to the north of Tokyo, the local government currently supplies 2.5million m3 per day of treated bulk water and some industrial water. Due to budget constraints, the prefecture chose to contract out the operation of a new 150,000m3 per day WTP due to be commissioned in 2005. Japan’s most comprehensive PSP scheme to date is currently under consideration. The city of Wakayama to the south of Osaka has commissioned a feasibility study to replace three old plants with a new 92,000m3 per day facility at a cost of ¥24 billion (US$205 million). If approved, the plant could be operational by 2007. In addition, the renewal of a sludge treatment line at the Okubo WWTP will be implemented in the form of a 20-year BOT contract and the bid process is expected to commence in February 2004.

MAJOR CITIES City 2000 2015 Status Tokyo 26,444,000 27,190,000 N/A Osaka 11,013,000 11,013,000 N/A Nagoya 3,157,000 3,283,000 N/A Kitakyushu 2,750,000 2,926,000 N/A Sapporo 1,813,000 2,002,000 N/A Kyoto 1,849,000 1,899,000 N/A Hiroshima 866,000 876,000 N/A Sendai 953,000 1,139,000 N/A

Sources: Ministry of Environment, Web Site. Testar, J.T. (2002). Asian Water 18 (5), 7-9. Japan edges towards PSP. Global Water Intelligence, July 2002, pp10-13 PSP in Japan. Global Water Intelligence, September 2003, pp14-15

JORDAN PART 2: COUNTRY ANALYSIS


JORDAN Water Resources In the Amman-Zarqa area where some 60% of the national population lives, the daily availability of drinking water is the lowest for an urbanised area in the world. In Jordan, water supplied for domestic usage is about 115L a day. This figure does not take into account distribution losses and other municipal uses. In consequence, the actual daily delivery of water is 85L a day. Municipal water demand has surpassed the available supply since the mid-1980s and summer rationing was introduced systematically in most provinces since 1988. In Amman, running water is only available for a few hours of the week. In Amman during the 1998 drought, municipally supplied water was only available for two days a week. Water from the Bassel Dam in southern Syria has started to flow to Jordan. This is the result of an accord with Syria to pump 3.5million m3 of drinking water to Amman in August 2000. Water provision and use in Jordan (1992)

Domestic use (L/day) 115 Agriculture 74% Industry 5% Domestic 21% Total (million m 3) 875

Sewerage systems and treatment plants have been built or are under construction in most towns, but sewage treatment remains at an early stage of development, with less than 20% of effluents subject to treatment. Water Management Jordan’s revised €2.29 billion 2002-2011 water sector policy plan’s 53 projects include 10 projects worth €998 million earmarked for PPP. The original 1997-2011 plan was to cover 61 facilities at a total cost of US$5 billion. Capital spending in 1997/98 was running at US$98 million pa. In the longer term, the building of the Red-Dead Canal, aimed at channeling water from the Red Sea to the Dead Sea, using a desalination facility remains under consideration, despite its estimated cost of US$3 billion. In September 2002 a US$800 million plan for piping water to the Dead Sea was unveiled. The 186 mile pipeline is designed to prevent the continuing shrinkage of the sea, which has caused problems for n=both Jordan and Israel. The World Bank is assisting Jordan with a plan that aims to pump 2billion m3 of water per annum from the Red Sea to raise the level of the Dead Sea back to its historic levels of about 395 meters below sea level as opposed to its present level of 410 meters. Without this, the Dead Sea is expected to dry up by 2050 Privatisation of Amman’s water and sewerage management Jordan has adopted a draft law on privatisation that came into effect at the end of 1999. Although initiated in the mid-1980s, privatisation has only now been taken seriously because it is a prerequisite to Jordan's entry into the World Trade Organisation (WTO). The draft law is said to include safeguards for employee rights and a clause giving the government the right to maintain a golden share in any privatised institution. The Greater Amman water management project was awarded to Suez in 1999 (Ondeo 75% and Montgomery Watson-Arabtech Jardaneh, 25%) and has been supported by a US$55 million World Bank loan in March 1999. The overall project cost is US$136 million, the Government of Jordan contributing US$17 million, the European Investment Bank US$44 million, and Italy US$20 million. The 51 month contract aims to improve the efficiency, management, operation, and delivery of water and wastewater services for the Amman Service Area, covering about 1.6million people. The Greater Amman area accounts for 45% of the country's total drinking water consumption. The project seeks to improve the efficiency of the water distribution system through leakage management, network rehabilitation, and a program of meter repair and replacement, reducing unaccounted-for water by at least 25% as well as increasing sales revenues. Water and sewerage facilities are to be upgraded and the sewerage network extended. The contract has enjoyed limited success, due to institutional conservatism. A 25 year concession to pump and distribute 100million m3 of water per day 325km from the Disi aquifer has been under consideration since 1998. Capital spending of US$625 million will be required. Five groups have pre-qualified to bid for the project, with US$200 million provided by the Jordanian Government and the Social Security Corporation. Jordan’s estimated US$120-140 million Wadi Main, Zahra and Mujib DBO water treatment scheme was won by a JV between ABB SUSA and Earth Tech (Tyco). The 55million m3 per day spring water treatment plant is being funded by USAID.

JORDAN PART 2: COUNTRY ANALYSIS


MAJOR CITIES City 2000 2015 Status Amman 1,148,000 1,654,000 Water management project for Suez

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Northern Jordan 25 year water treatment BOT Ondeo A water treatment BOT for Northern Jordan Suez’s Ondeo Degremont, Ondeo and Morganti of the USA have been awarded a 25 year BOT for a 530,000m 3 per day water treatment plant in northern Jordan. US Aid, the US Agency for International Development is providing 60% of the project's US$169 million cost, with the rest coming from local sources. The As -Samra facility will replace an existing waste stabilization pond treatment system and will provide drinking water to about 2million residents in the Jordanian capital Amman and surrounding towns. Construction started in May 2004, with the consortium running the plant from 2006-28. Private sector company operations (Please see the relevant company entry for details) Company Parent company Population served (country) Water Sewerage Total Ondeo Suez (France) 2,000,000 0 2,000,000

KAZAKHSTAN REPUBLIC PART 2: COUNTRY ANALYSIS


KAZAKHSTAN REPUBLIC VE and Cascal’s contracts in Almaty (Alma Ata) and Astana demonstrate that the private sector has a role to play in the economically beleaguered central Asian republics. However, this remains a most difficult market as VE has found out. Kazakhstan’s greatest challenge remains coping with its Soviet legacy of resource degradation, especially in the Aral Sea, along with an endemic shortage of water.


Water resources Total water resources in an average year are estimated at 100.5km3 with 46km3 suitable for use. There is an average shortage of 6.6km3 pa, rising to 18.3km3 in a drought year. Water use has been falling since 1991 (36.91km3) with the move from Soviet-led cotton irrigation projects to a more sustainable agricultural policy. In consequence, the 1996 level of usage was 32.72km3. In terms of seasonal and geographical availability, water remains a severe constraint on development.


Water pollution Effluent discharges of polluted water into rivers fell from 0.34km3 pa in 1991 to 0.23-0.24km 3 in 1993-95. Total wastewater discharges in 1994 were 6.04km3, with 5% from domestic sources, 24% from agriculture and 71% from indus try. Of the 10 main river basins in 1996, one (Ural) was classified as extremely polluted (Grade 7), one (Ertys) as highly polluted (Grade 6), one (Satysu) as polluted (Grade 5), one (Nura) as rather polluted (Grade 4), three (Syr-Darya, Ili and Karatal) as moderately polluted (Grade 3) and three (Shu and Talas) as clean (Grade 2). The Aral Sea is arguably the greatest global environmental catastrophe to date. Its problems are described in the country entry on Uzbekistan. As for groundwater, 15.86km 3 is assessed as suitable for use, including 10.80km3 of brackish water, for industrial use. Groundwater pollution from mineral extraction, industry and petrochemicals is widespread.

Urban Services Safe drinking water 81% l per capita per day 250 Sewerage 91%

Political responses The Ministry of Ecology and Natural Resources has drawn up a series of priority projects for 1998-2000, along with a long-term plan for 1998-2030. Planning is carried out within the National Environmental Action Plan for Sustainable Development of the Republic of Kazakhstan (NEAP/SD). Current projects include: industrial effluent treatment (US$11.0 million), sewerage (US$15.5 million), water management (US$10.0 million) and a leakage demonstration project for Almaty (US$20.0 mill ion).


Urban water services Per capita water use in urban areas ranges from 25-500L/day (Almaty 251L/day) against a range of 15-320L/day in rural areas. Reformulate 18.6% of urban drinking water samples taken in 1994 failed on hygiene grounds.

KAZAKHSTAN REPUBLIC PART 2: COUNTRY ANALYSIS


According to the draft State Programme on Poverty Reduction for 2003-2005, 75% of the population is connected to a water network. The use of alternative sources is increasing; between 1997 and 1998 alone, the percentage of people using decentralized sources increased from 16 to 23%, in part due to 22% of water pipelines not functioning. Between 1990 and 1997 the proportion of piped water failing water quali ty standards rose from 9% to 26% and approximately 50% of the population drinks water that fails salinity and hardness standards. In rural areas about 9% of the population have access to piped water.

Groundwater Total recharge (1998, km3) 35.87 Per capita (1998, m3) 2,133 Withdrawals (1996, km3) 3.91 For domestic use (1996) 58% For industry (1996) 28% For agriculture (1996) 14%

Private sector involvement Since 1993, the Government has sought to encourage international investment along with privatisation proposals. The World Bank (Kazakhstan joined the IFC in 1993) provided US$16.5 million out of US$20.9 million for initiating the long term upgrading of the city of Atyrau’s Vodocanal water and sewerage systems in June 1999. Kazakhstan’s environmental legacy and its low population density have limited private sector investment to date, except where it is related to the petrochemical industry. Both the Asian Development Bank and the European Bank for Reconstruction and Development are active in the country, concentrating on financial institutions and the petrochemicals industry

MAJOR CITIES Population 2000 2015 Status Almaty 1,130,000 1,144,000 Partial privatisation of some suburbs

Cascal’s activities in Almaty In 1998, Biwater (Cascal) was awarded a five year O&M contract for water and sewerage services in the Kaselen suburbs of Almaty. During the first year of the contract, there was major improvement in service quality, with water provision going from 4-6 hours per day to a 24 hour service. Billing was only introduced once the water provision service was seen to have improved. A 25% collection rate has been improved to 90%, partly since the police services are involved in the procedure. The contract is now profitable on an operating basis and Cascal has an option to buy the suburb’s water company at a nominal price. VE enters Almaty and Astana and leaves Almaty VE was awarded two contracts in March 2000. (1) A 30 year water management contract for Almaty has yet to start due to contractual problems. (2) A US$40 million contract for 51km water pipeline and pumping station renovation for the new capital Astana (population 320,000, to grow to 690,000 by 2020). Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Kaselen (Almaty) O&M for water management Cascal Astana Water management VE Japanese aid for Astana In 2003, the Japan Bank for International Cooperation signed a loan agreement for Yen21,361billion (US$180 million) with the government of Kazakhstan to develop Astana’s water supply and sewerage systems. Private sector company operations (Please see the relevant company entry for details)


Cascal Biwater (UK) / Nuon (Netherlands) - 0 - VE VE (France) - 0 -

KENYIA PART 2: COUNTRY ANALYSIS


KENYA The privatisation of Kenya’s urban water services is set to develop over a series of phases in the medium to long term. This remains a challenging market, which may be a benchmark for how PSP can be extended and made acceptable through the deliverance of measurable service improvements.


Water and sewerage services 93% of Nairobi receives potable water and 35% some form of sewerage. 65% of the overall population have access to safe water – 70% of the urban and 46% of the rural population. There are 742,000 water connections and 680 piped systems in the country, along with 350 community water schemes. 145,000 connections to 35 sewerage systems serve 2million people. Total water demand was approximately 3,150million m3 in 2000 and is forecast to rise to 4,343million m3 in 2010 and to 5,552million m3 in 2020. The Kenyan AfterCare Study of 1998 forecast total spending of US$2.6 billion being needed to upgrade and extend the water and sewerage networks. Studies carried out in 2001-03 point to an immediate need for US$1.0–1.4billion for the water system. This does not include the need for more water storage capacity, which is becoming a critical issue due to periodic droughts in recent years. In reality, investment has been falling, with capital spending in 2001-02 42% of its 1994-95 level. This has in part been due to the economic consequences of drought and flooding between 1997 and 2001.


Water is a class issue Families who are connected to piped water in cities pay KSh240/m 3 for water, compared with KSh845/m3 for those who use vendors.


A partial privatisation VE and its local partner Saureca Space gained a management contract in 1999 for water services in Nairobi, involving improving basic services and reducing distribution losses from their current 50% level for some 2million people and may be developed into a concession contract in the future. The contract started as a 10 year outsourcing contract for Nairobi's water services for a flat fee, involving installing 40,000 meters in the first four years and a total of 130,000 meters by 2009. The 2002 Water Act, allows for concession contracts to be awarded. It also authorises the setting up of a national regulator and appeals systems. At the local level, political opposition to the presence of foreign companies has even resulted in aid funding being withdrawn. The Government’s failure to provide universal water access by 2000 has been a major boost for PSP at the national level. A new plan seeks universal water access by 2010. A PSP contract for the 2.1million people living in Mombassa would include the whole of Mombassa and the coastal region, which has a number of separate urban areas. Access to piped water in the region is 29%, along with 10% for sewerage.

Freshwater Annual availability (1998) 7.4km3 Per capita 378m 3 Annual withdrawal (1992) 1.1km3 Domestic 20% Industrial 4% Agriculture 76%

KENYIA PART 2: COUNTRY ANALYSIS


The National Water Conservation and Pipelines Company (NWCPC) was set up in 1988 to operate systems that could be run on a cost recovery basis. However, the NWCPC has since accumulated debts of KSH1 billion and is unable to service its interest charges.

Operator Systems Connections Ministry of Water 630 280,000 NWCPC 40 230,000 Nine municipalities N/A 70,000 Nairobi municipality N/A 160,000

Financial performance of water service, 2001

(KSh million) Revenues Expenses Nairobi 1,980 1,500 NWCPC 1,200 1,250

Three water boards were set up in 2004: the Water Resource Management (WRM) Authority, the Water Services Regulatory (WSR) Board and the Water Services Trust (WST) Fund. The WRM Authority will see to the restoration of degraded water catchment and depleted aquifers to guarantee availability of the resource for development. The WSR Board will licence, regulate and supervise water services boards and ensure access and expansion, whereas the WST Fund is charged with the responsibility of a financing instrument for expansion of water services particularly to the poor.

Groundwater Annual availability (1998) 1.1 km3 Per capita 35 m3

Annual withdrawal (1992) 0.18 m3

Source: PriceWaterhouseCoopers (2003): Building Kenya Together. Conference on Private Sector Participation in Kenya’s Infrastructure, 15th May 2003 World Bank (2004). Kenya: towards a water-secure Kenya: water resources sector memorandum, Vol. 1 of 1. Washington D.C., USA, World Bank

KUWAIT PART 2: COUNTRY ANALYSIS


KUWAIT The development of Kuwait’s first comprehensive sewage treatment scheme involves one of the world’s largest sewage treatment works. It is likely that the water and sewerage networks are also to be considered for PSP, but in the longer term.

Economics (2002) GDP per capita US$15,193 GDP per capita (PPP) US$16,240


Population and water Kuwait has a population of 1.9million people, all of whom effectively live in five urban areas. Virtually all of Kuwait's water comes from government constructed seawater desalination plants. The Iraqi occupation of 1990-91 caused considerable damage to these plants but most of them are once again fully operational. One of these was the largest in the world with a production of approximately 200million gallons of drinking water per day. Drinking water The Government is upgrading and expanding its desalination facilities. The Az-Zour facility (80million m3 per annum) was extended to provide a further 50million m3 per annum in 2002 at a cost of $250 million. The original plant was built in the 1980s for $230 million. New desalination plants providing a total of 40million m3 per annum were put into operation during 1997-98. In 1999, Kuwait's Ministry of Electricity and Water awarded the construction contract for a US$500 million desalination plant for the proposed Sabiya New City development. Construction of the facility will start in 2004 and it will enter service in 2007, supplies 83million m3 per annum of potable water to the industrial area and existing water distribution complexes. A plan for the sale of 300million m3 pa of water by Iran to Kuwait via a $2 billion dedicated pipeline from northern Iran has been under development since 2002.

Freshwater Annual availability (2000) 0.0km3 Per capita 10m³ Annual withdrawal (1994) 0.0km3 Domestic (1987) 37% Industrial (1987) 2% Agriculture (1987) 60%

Privatisation The Employment Law for the privatisation of various non-oil state enterprises and utilities was enacted in 1994. By 1998, the government had sold shares in 25 local companies worth about US$3 billion. Kuwait has adopted the World Bank’s proposals for privatising the Ministry of Electricity and Water, with the share sales to be handled by the Kuwait Investment Authority. Water services are currently earmarked for privatisation in the medium term. Water is sold at US$2.40 per 1,000 US gallons to residents, (or US$1.00 to tanker companies who sell it on at US$3.30 per 1,000 gallons) and US$0.80 per 1,000 US gallons to industry.

Groundwater Annual withdrawal (1994) 126.5 Domestic (1987) 0% Industrial (1987) 0% Agriculture (1987) 100%

MAJOR CITIES City 2000 2015 Comments Kuwait City 879,000 1,136,000 Wastewater privatised

KUWAIT PART 2: COUNTRY ANALYSIS


Private sector participation In 1999, Kuwait's Ministry of Electricity and Water awarded the construction contract for a US$500 million desalination plant for the proposed Subiya New City development. The facility is designed to be operational by the end of 2002, and will supply up to 122million gallons per day of potable water to the industrial area and existing water distribution complexes. A US$390 million BOT wastewater treatment plant contract at Sulaibaya was awarded to the UU and Bechtel led consortium in 2001, following delays over assessing the three shortlisted bids. The facility will treat 375,000m 3 of wastewater per day from 2005, with projected revenues of US$2 billion over the contract’s life. This will be the world’s largest membrane-based water reclamation facility. With a tariff of US$0.47 per m3, it is anticipated that the facility will save the country US$3 billion during the life of the concession. There is an option to extend the facility to handle 600,000m 3 of wastewater per day in the future if needed. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Sulaibaya 30 year sewage treatment BOT Utilities Development Co Private sector company operations (Please see the relevant company entry for details)


Utilities D. Co UU (UK) 0 1,900,000 1,900,000 Source: Sulaibaya achieves financial close. Global Water Intelligence (2002), 3/8 p9.

LATVIA PART 2: COUNTRY ANALYSIS


LATVIA Water resources and distribution Both surface water and groundwater are used in equal amounts in Latvia. In 1995, 455.6million m3 of water were abstracted from natural water resources (about 1.5% of the available water), including 58% for domestic and commercial use, 18% for industry, 8% for agriculture, 7% for energy production and 9% for fish farming. More than 90% of the population in Riga, 54% in Liepaja and more than 80% in other cities and towns are served by mains water. In smaller towns, the figure is typically 50%. In 1995, the daily water supply per capita in the cities of Latvia was as follows: 339l in Riga, 331l in Ventspils, 223l in Daugavpils, and 139l in Liepaja. In some cases, total losses in water supply systems are estimated to be up to 25% of water abstraction rates. According to drinking water quality data, the levels of various chemical indicators failed to comply with government standards in 34.7% of drinking water test samples in communal water supply systems, mainly due to high concentrations of iron. Bacterial levels exceeded the standards in 10.3% of samples due to the dilapidated water supply system and the absence of iron separation equipment. Sewerage and sewage treatment In 1991, secondary sewage treatment works were installed in Riga, resulting in a significant improvement in the treatment of wastewater. Since 1991, reconstruction projects for wastewater treatment plants have begun in Liepaja, Daugavpils, Cesis and Riga. In addition, the amount of wastewater has been reduced by 42%, biologically degradable substances by 70%, nitrogen compounds by 57% and phosphorus by 39%. The ‘800+’ programme began in Latvia in 1995, aiming to improve water supply and wastewater treatment in small towns and rural areas, through the refurbishment and construction of 800 sewage treatment works by 2010. Inland water quality Latvian rivers have moderate levels of organic pollution and nutrients, quite high concentrations of oxygen, and rich flora and fauna. Water quality is considered to be quite good in 80% of Latvian rivers. Trends of nutrient concentrations at the observation points in the lower reaches of the large rivers have not significantly changed since 1991, excepting slight decreases in the concentrations of phosphates. Compared to the 1970-1980s, the biological quality of the Lielupe River has generally improved. Between 1993 and 1996, the biological water quality of 198 small rivers was investigated. Biological water quality is considered to be good in 44.7% of them, quite good in 47.7% and not good in 7.9%. Despite a reduction of mineral fertiliser application by 90% during 1987-1996, significant decreases of nitrogen and phosphorus loads in the seven largest rivers have not been observed. One of the priority areas for the National Environmental Policy Plan of Latvia is to reduce total nitrogen emissions into water from point sources and the leaching of nitrates and phosphates from agriculture by 50% of the 1994 level by year 2010. Privatisation prospects In 1996, the EBRD provided €18 million out of a €97 million loan package for the upgrading and expansion of water and sewage treatment works serving Riga. As with Estonia and Lithuania, the EBRD’s financing was arranged as a US$90 million loan portfolio for supporting projects to be carried out by Suez’s Degrémont. There are no current plans for the privatisation of Riga’s water and sewerage services, but following the pattern in the other Baltic states, such a move appears to be likely.

MAJOR CITIES Population 2000 2015 Status Riga 761,000 761,000 PSP under consideration

THE LEBANON PART 2: COUNTRY ANALYSIS


THE LEBANON The civil war’s legacy lingers on The civil war effectively obliterated the Lebanon’s water and sewerage treatment facilities. By 1996, all sewage effluents were discharged untreated, while 60% of the country’s water distribution capacity had been rendered inoperable. The Lebanon has a nominal water treatment capacity of 385,000m 3 per day, equivalent to 70% of the minimum daily requirement, but in 1998, 80% of drinking water was not subject to treatment. A number of primary treatment facilities with sea outfalls are being developed for the coastal zone with the short term aim of all wastewater to be subject to primary treatment. Secondary treatment plants are planned for inland areas where the effluent from these plants will be used for specific agricultural uses. Domestic consumption of water in the country as a whole was 60L per capita per day in 1997, compared with 150L per capita per day in Beirut. Much of the water supply is only chlorinated or not treated at all where it is withdrawn from the ground water. In 1998, 70% of Lebanon's fresh water sources were found to be subject to bacteriological pollution, mainly due to household effluents and industrial pollution. Water demand was 1.48billion m3 in 1998 and is forecast to rise to 2.84billion m3 in 2015, although internal resources are only 2.2billion m 3 pa. The UN Economic and Social Commission for Western Asia believes that Lebanon could see serious water shortages by 2025 unless losses are curbed. Lebanon has 2.85billion m3 of water pa, 25% in underground reserves. In 2000, the country used 1.14billion m3, mostly on agriculture, and demand is expected to rise to 4billion m3 by 2025. Much of the water is wasted or contaminated through pesticide use and industrial pollution. Only 40% of Lebanese domestic customers pay for their water, and the income is not enough to cover operation and maintenance costs. Some industrial facilities (and hospitals) have water meters installed. For household use, the current pricing policies have one unified price per cubic metre per day for all household connections within a given water authority's jurisdiction. The regional authorities are to install water meters to house connections and to develop pricing policies that reflect individual household usage rather than fixed per day water supply. In addition, pricing policy is to reflect investment costs. Capital spending plans The Government has estimated that US$900 million needs to be spent on infrastructure for basic water provision needs over a three year period. In 1997, US$140 million of water provision projects were being carried out, with immediate additional spending needs of US$770 million identified. Capital spending for sewerage projects and sewage treatment works was US$90 million in 1996, with a further US$409 million in 1997. Longer term, US$750 million needs to be spent on coastal sewage treatment plants, US$1.0 billion on inland facilities and US$1.152 billion on sewerage networks. A further US$1,000 million for water treatment and distribution has been identified. The Government is proposing financing the construction of a US$200-220 million 260,000m 3 per day water treatment plant and pipeline for Beirut through a 28 year concession have been delayed due to political concerns. The World Bank has supported this project and seven consortia had pre-qualified at the time of the postponement in 2002. A reformed water management system Water resource management has been rationalised into five regional water authorities and the Litani River Water Authority. Three of these five will oversee all aspects of water management (including wastewater) while two of these authorities (the Bekka and the South), will not be responsible for agricultural water supply. All of these authorities will in turn be expected to develop regional integrated land and water management. Suez Ondeo has been appointed to manage water and wastewater systems in the city of Tripoli for four years from 2003. The contract, which is being financed by a US$21 million soft loan from France’s Agence Française de Développement, provides for Ondeo to repair and expand WWTPs and water supply networks. In 2004, the Government announced plans to "transfer the full cost of providing water supply and sewage disposal services from the state to consumers through an equitable tariff and collection system" but only Sidon Water Authority has domestic water meters that charge on a volumetric basis.

LESOTHO PART 2: COUNTRY ANALYSIS


LESOTHO The Lesotho Highland Water Project Lesotho is a small country of some 2million people, surrounded by the Republic of South Africa. The Highland Water Project described below is the world’s largest water catchment and transportation infrastructure project to date. While there is no water service element per se, water exports from the project have become Lesotho’s largest export earner. The project therefore merits attention because it demonstrates the economic power of water. Water rich and water poor Water is arguably the only abundant natural resource in Lesotho. South Africa’s need for reliable long term water supplies resulted in two water export feasibility studies in Lesotho's Highlands in the 1950s and 60s. Both failed because agreement could not be reached between the two Governments on payment for water exports. However, a new feasibility study was launched in the 1970s, which in 1979 and 1983 recommended a 70m 3 per second water transfer scheme, along with hydropower generation to enable Lesotho to replace electricity imports with locally produced energy. The dams trap water that normally runs into Lesotho’s Orange River which are discharged into the Atlantic Ocean, and turns it north towards Johannesburg and Gauteng Province. On October 24, 1986, an agreement was signed between Lesotho and South Africa to proceed with the Lesotho Highlands Water Project (‘LHWP’) for the transfer of water from Lesotho. About 115m 3 per second of water flows out of Lesotho via the Sengu River. The LHWP exploits this by arresting the southern flow, storing the water and redirecting it northwards to the Vaal River, to supply the state of Gauteng, which has a population of more than 10million. The cost of phase 1A amounted to €1.5 billion and attracted external funding from European export credit agencies (US$380 million), the World Bank (US$69 million), the EU Commission (€50 million) and the European Investment Bank (€23.5 million). In 2002, the cost of Phase 1B was estimated at €1.1 billion and has a similar funding pattern with €99 million being made available by the European Investment Bank. Phase 1A and 1B of the LHWP has resulted in savings to South African water users estimated at US$30 million per year. The aggregate benefits (savings) to both South Africa and Lesotho amassed from the LHWP have a net value of about US$1 billion for Phases 1A and 1 B. Of this sum, 56% of the cost savings will go to Lesotho in terms of a royalty payable for the sale of water to South Africa. In addition to the royalty payable to Lesotho, there is a levy paid by water customers in Gauteng to finance the project. On 1st October 1990, the levy was set at seven cents per m3 of water and was increased to ten cents per m3 from 1 October 1991. From 1 October 1996, the levy was R 0.3808 per m 3. The levy is to remain at this level for fifteen years. LHWP – Phases 1A and 1B m3/second Year

Commissioned Phase Supply Type Incremental Water

supply Total Water supply

Katse 1998 1A Dam & tunnels 18.2 18.2 Mohale 2003 1B Dam & tunnels 9.5 27.7 Matsoku 2003 1B Weir & runnels 1.9 29.6 At the completion of phase 1B, the full yield of the system will be 933.5million m3 per annum, compared with a yield of 574million m3 per annum at the end of phase 1A. Water transferred increased from 574.1million m3 in the year to 31st March 2001 to 593.2million m3 in 2002. By the end of 2002, the total volume of water delivered was 2,278million m3, generating royalties of R863million. The water royalty in 2002-03 contributed 6.4% of the Government of Lesotho’s budget. The fluid politics of water Times and politics change. At the project’s inception, it was regarded as a mechanism for ensuring resource stability in the region. After the democratic transition in 1994, the project was seen as a means of getting water to the arid townships of the region. This area accounts for more than 40% of South Africa's urban population by the year 2000 and over half of its industry. The project period runs from 1990 to 2017. The water transfer project is based upon a series of reservoirs, transfer tunnels, delivery tunnels and pumping stations. In 1998, 18m 3 per second of water was being delivered to South Africa from the Katse Dam. By 2020, four further dams will be linked to the scheme, delivering a total of 82m 3 per second. Some problems There are a number of costs associated with the project. Total environmental, compensation and rural development costs were estimated in 1989 by the authorities linked with the project at US$39 million, or 4% of the total project’s cost. Sources external to the project have pointed out that the project involves the loss of 11,000 hectares of grazing or arable land, affecting 20,000 Basotho people, who are mostly subsistence farmers. This in turn will exacerbate the country’s dependence on food imports.

LESOTHO PART 2: COUNTRY ANALYSIS


In May 2002, Masupha Sole, the former chief executive of the Lesotho Highlands Development Authority was sentenced to a total of 18 years in prison. He had been convicted on 13 counts of bribery and fraud for taking bribes of about US$2 million over a period of nine years from international consultants and contractors. In September 2002, the Lesotho High Court found Canadian engineering firm Acres International (Acres) guil ty of paying bribes for contracts on the project. The company had paid US$278,000 to Masupha Sole, through its local agent. Acres maintains that it was unaware that some of its money that was being used on the project was being secretly paid to Sole's Swiss bank accounts. Acres was fined €22.8 million in 2003. If the judgment is upheld, the firm faces being disbarred by the World Bank, which is financing the project. This will also affect Acres involvement with the Bujugali Dam in Uganda and the Nam Theun 2 dam in Laos. An internal investigation by the World Bank in 2003 found that there was insufficient evidence to punish Acres. Other companies involved in the project yet to be tried include Spie Batignolles of France and the UK’s Sir Alexander Gibb, now part of the US group Jacobs. Longer term considerations Some authorities on water conservation now believe that South Africa ought to concentrate on conservation as a means of postponing the further development of the project. For example, projections by Rand Water indicate that the second phase (the Mohale Dam) could be delayed by some years with a 10% decrease in water consumption, or up to 17 years with a 40% decrease in water consumption. It is unclear if the aspirations of people living in these townships have been fully factored in for those assumptions. Utility privatisation is under consideration The UK’s Adam Smith Institute has been working for the Lesotho Government since 1997 with the aim of developing an effective legislative and regulatory framework for the water sector, and devising and implementing a programme for private sector participation in the delivery of water and sewerage services. The latter involves specifying the best form of management contract, developing the acceptance criteria, initiating the bidding process and assisting the government in awarding the short term management.

LITHUANIA PART 2: COUNTRY ANALYSIS


LITHUANIA There has been a widespread attempt to upgrade the country’s infrastructure and the mobilisation of private sector investment since the early 1990s. This has been held back by a poorly developed legal infrastructure, which is being belatedly put into place.


Laws Lithuania is undergoing a radical programme of revising environmental legislation and standards in preparation for compliance with EU environmental standards. A draft Standard on Drinking Water, Hygiene Requirements and Monitoring is under preparation. Other legislation includes the Law on Environmental Protection (1992), Lithuanian Environmental Strategy Action Programme (1996), the Water Law (1997), the Law on Environment Pollution Taxes (1991), and the Draft Law on Drinking Water (in preparation). Despite this, by 2004, the country laws remain in need of drastic revision by 2005.


Water usage In 1995, fresh water extraction was 4,582million m3 compared with 4,510million m3 in 1991. In 1995, 304million m3 came from groundwater resources. Domestic/municipal consumption was 196million m3 against 369million m3 in 1991. Industrial use fell from 216million m3 in 1991 to 49million m3 in 1996. The decline in consumption during recent years is related to the decline of industry, economic restructuring, and the introduction of taxes for water and effluent discharges. Water pollution taxes

US$per tonne 1994 1996 BOD 24.8 40.6 Nitrogen (N) 24.8 90.6 Phosphorus (P) 84.4 308.3

In 2004, plans were prepared to rationalise the country’s 50 larger and 200-300 smaller water entities into 5-10 regional companies.


Sewerage and river water quality There are more than 700 sewage treatment works in Lithuania with a total capacity of about 1.2million m3 per day, 90% being for rural areas, with an average capacity of about 100m3 per day. The recycling of wastewater has only been used in the town of Akmene, where all the treated wastewater (10,000m 3 per day) is utilised in the cement factory. 60.4% of the population was connected to the sewerage system in 2002. Wastewater discharge has fallen from 252million m 3 in 1997 to 168million m3 by 2002.

1997 2002 Untreated 17% 2% Primary 15% 18% Secondary 67% 61% Tertiary 1% 19%

With the reduction of pollution loads as a consequence of the taxation regime and upgrades to some sewage treatment facilities, water quality in rivers and lakes has somewhat improved.

LITHUANIA PART 2: COUNTRY ANALYSIS


River water quality (1995) % Good 43% Fair-Poor 48% Bad 9%

BOD emissions from point sources (tonnes pa)

Year 1992 31,900 1993 27,920 1994 27,720 1995 21,000 1996 16,600

As part of Lithuania's EU accession programme, tertiary wastewater treatment is planned in 47 cities and towns. Tertiary treatment currently exists in six cities. On completion, 209million m3 pa, or about 83% of wastewater generated will be treated to secondary or tertiary standard, as appropriate. A total of US$250 million has been spent on wastewater treatment projects between 1992 and 2002. Tertiary treatment is being used in current construction and upgrading projects with a total capacity of about 110million m 3 per year, or 53% of effluent generation. Funding constraints are severe, and it is currently uncertain how all of these projects will be completed.

Freshwater Annual availability (1998) 15.56km3 Per capita 4,174m3 Annual withdrawal (1993) 0.25km3 Domestic (1993) 81% Industrial (1993) 16% Agriculture (1993) 3%

Water resources 87% of Lithuania's water resources have levels of iron and manganese that exceed permissible rates. This iron is purified from 28% of the supplied water, but the percentage is expected to increase with the building of new purification stations in Vilnius, Kedainiai, Anyksciai, and the Pagiriai water fields. Some Litai315 million (US$80 million) is needed for the construction of water purification facilities in Lithuania.

Groundwater Annual availability (1998) 1.20km3 Per capita 332m

Privatisation prospects In 1995, the EBRD provided €11 million out of a loan package of €67 million for the construction of a water treatment plant at Kaunas, serving Vilnius. The plant provides water for 700,000 people and was constructed by Degrémont (Suez). The water provision services for Vilnius are to be privatised on a concession basis.

MALAWI PART 2: COUNTRY ANALYSIS


MALAWI Access to clean water has improved from 48% in 1994 to 56% in 1999. Under a national water supply programme some 3,000 boreholes have been drilled. A 1998 survey showed that 23,000 boreholes would need to be drilled to cover 100% of the population at a cost of MK360 million (€8.4 million). The Water Resources Act provides for the control, conservation and use of Malawi's water resources. All public water is vested in the President of the Republic who has control of the utility. Control of the waters is vested in the Minister of the Environment. Attempts to commercialise its water utility have been hampered by the debt burden the company carries, along with outstanding client accounts and weak debt collection systems. The Water Supply Authority is one of the 100 state enterprises that Malawi has identified for privatisation. Malawi's four-year old privatisation programme is being carried out under the terms of the World Bank and the International Monetary Fund (IMF). An official admitted that there was some resistance to the privatisation of the water utility because of fears of price rises and job losses. To compensate for the latter, the Government has set up "training projects for retrenched workers".

MALAYSIA PART 2: COUNTRY ANALYSIS


MALAYSIA Malaysia has taken a systematic approach towards encouraging private sector management and investment in water and sewerage services as part of its ‘2020 Vision’ of becoming a fully developed nation by 2020. Private sector involvement has come both from local and international companies, with local players making significant advances in the past two years. Malaysia seeks to develop its water and sewerage services on a fully concessional basis and is belatedly preparing for an independent regulator and a formal concession award process. Water policy has further been confused by a dispute between Malaysia and Singapore.


Water and sewerage provision

(million) 1990 % 2000 % Urban 9.17 96% 12.65 99% Rural 5.93 67% 7.33 87% Total 15.10 80% 22.20 92% Leakage 43% 37% Sewerage 42% 79%

In 1994, 5% of the population had secondary treatment and 5% primary treatment, with access to some form of sanitation having risen from 70% in 1980 to 94%. During that period, access to potable water actually fell from 80% to 78%. This reflects a period of rapid population growth and urbanisation, whereby resources were fully committed towards keeping up with developments in urban areas, along with the higher relative cost of installing piped water compared with basic sanitation measures.


River quality and pollution Industrial development and urbanisation, allied with a minimal sewage treatment infrastructure has resulted in a dramatic deterioration in river water quality in recent years. In consequence, a number of rivers are now unsuitable as sources of drinking water and are affecting further development.

Quality by river 1987 1996 Clean 49% 28% Polluted 47% 43% Very polluted 3% 29%

By 1998, only 25% of rivers were classed as clean. Domestic sewage accounted for 65% of the BOD load, agricultural effluent 27% and industry 8%. Johor is regarded as the state with the most polluted rivers, followed by Penang and Pahang. In recent years, data on inland water quality has been volatile. Thus an improvement between 1994 and 1995 has been countered by a significant deterioration since 1995. It is likely that this is in part accounted for by the assessments being based on overall river quality, thus making year-on-year comparisons more volatile.

Urban Services Safe drinking water 96% L per capita per day 220 Access to sewerage 94% % Sewage treated 22%

Regulatory framework Malaysia’s framework legislation is laid out in the Environmental Quality Act, 1974 (127, Amendment A953 in 1996), which outlines the Ministry of the Environment’s powers and objectives. Specific legislation includes the Waters Act, 1989 (418) and the Sewerage Services Act, 1993 (508).



Government, planning and privatisation The traditional role of the Government, via the Public Works Dept. (PWD), is the supply of funding and planning of water projects in the states. Individual states are supposed to levy fees which pay for basic O&M, with all extra work funded by central government. This used to be in the form of grants, now it has been turned into 0% interest loans. Loans are approved by the Federal Government. The Government has much experience of working with the private sector for evaluating problems and projects, especially in the use of external consultants. Tariff charges are decided by state governments. The Government thus now regards water and sewerage as a commercial area. Its privatisation or commercialisation has to be approved through economic planning units. Until 2004, no open bids took place and thus came through private sector proposals, with no competitive bidding. This is how Indah Water gained its nation-wide sewerage contract. Current treatment capacity of 10,730 MlD is adequate for current demand, but needs to be expanded to meet future growth, with 62 water resource projects earmarked for 2000-50. Water consumption in Malaysia grew by 8% a year between 1981 and 2001 because of population growth, industrialisation and urbanisation and is forecast to rise by an estimated 4% a year until 2010.

Water demand MlD 2000 9,543 2020 19,086 2050 31,628

Malaysia is to spend RM50 billion (US$3.2 billion) on upgrading water and sewage services between 2005 and 2010. At the same time, a systematic approach to the award of PSP contracts is to be adopted. This is response to the ad hoc manner in which previous contracts have been awarded. It is unclear how extant contracts would be affected. This means that new contracts such as the proposals in Selangor and Sabah are unlikely to be awarded until an independent regulator is established and a suitable tendering process is in place.


Privatisation and priorities Malaysia prefers full concession awards, wherever possible, all ied with long concession periods, with 20-60 years being usual practice. Regulation is to be agreed upon within the terms of the individual contract, with government input with respect to health and environmental matters dealt with on an ongoing basis. Making water bills commercial remains a sensitive issue, as demonstrated by the political fallout over revising sewerage tariffs after privatisation. Pressure to privatise water services at the state government level is coming from the need to recover increased costs. Typically, states sell about 35% to 40% of the water produced. Metering is common for all household connections, but there have been a number of problems with the reading of meters. Low water prices mean that there is little illegal abstraction. Water tariffs in Malaysia will be increased from RM0.50 per m3 (€0.14) in 2002 to RM1.49 (€0.42) by 2006 and to RM2.25 (€0.62) by 2011. Tariffs are amongst the lowest in South East Asia, and cannot cover costs as 8 out of 17 state water providers ran a deficit in 1998. For example, the Selangor Government spends RM1 billion (€300 million) on operational costs and collects RM200 million (€60 million) from consumers. These costs are set to rise in order to cover investments in "analytical instruments and monitoring systems" as a result of a stricter standards laid down in the Safe Drinking Water Act. During the 1970s, 19 master plans were unveiled in order to implement the National Sewerage Development Programme. By 1990, only nine of these had even been partly implemented because of limited funds. In consequence, the 1993 Sewerage Services Act was passed in accordance with the National Privatisation Policy, to mobilise funds and management.

Access to sanitation 1970 1980 1990 Household sewerage 3% 4% 5% Septic tank 17% 22% 37% Flush latrine 3% 30% 45% Other latrines 59% 26% 6% None 18% 16% 6%

Malaysia’s sewerage is covered by the previously privatised Indah Water Konsortium (IWK). IWK has found that it is much harder to force people to pay for sewerage as part of bills than it is to force them to pay for water. It



remains usual to have the sewerage component as a top up on the water bill. The State Water Authority cannot compel the customer to pay the sewerage component of the bill. IWK had debts of MR700 million by 2000. The government took it over for MR200 million. The private sector continues to encounter problems with low tariffs and poor tariff collection. In 2001, private sector expenditure was RM2.76 billion while revenue was RM2.23 billion. In 2003, the Federal Government announced that it is to take over the management and financing of water supply projects from the country’s states, after some states revealed they were having cash flow problems relating to their infrastructure work. In Selangor, the state owns private water companies and contractors some RM3.9 billion. Only four of Malaysia’s states made profits from the sale of water in 2001.

Groundwater Total recharge (1998, km³) 71.0 Per capita (1998, m3) 3,310 Withdrawals (1993, km³) 0.4 For domestic use (1993) 50%

Companies noted The relationship between companies and their contracts has evolved constantly since the 1980s. United Utilities was part of a consortium that gained two concessions in 1993. In each case, its role is now limited to that of a minority shareholder (in Prime Utilities and Intan Utilities) with a degree of management input. While Prime Utilities has taken over the national sewerage concession, Intan Utilities has in turn ceded management control to VE after the French company became its main shareholder. Indeed, VE has also gained the subcontract for the operation of Puncak Niaga’s facilities.

MAJOR CITIES Population 2000 2015 Status Kuala Lumpur 1,379,000 1,882,000 Bulk water privatised

Water supply by state and contract type in 2000

Water supply (m3) Corporatised Privatised Government Kedah 0 0 987,805 Sarawak 0 0 186,000 Labuan 0 0 60,454 Perlis 0 0 91,232 Pahang 0 0 762,044 N Sembilan 0 0 527,542 Sabah 0 0 718,488 Perak 0 0 969,419 Malaka 0 0 386,364 Kuching 0 0 380,000 Sibu 0 0 130,650 Pulau Pinang 0 1,049,544 0 Terengganu 510,523 0 0 Selangor 3,436,500 0 0 Johor 0 1,285,409 0 Kelantan 0 213,700 0 LAKU 221,380 0 0 Total 4,168,403 2,548,653 5,199,998

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Johor-Barhu BOT contract, water supply Suez Kota-Kinabalu BOT contract, water supply Suez Perak BOT contract, water supply Suez Ipoh, Perak Concession, water supply Intan Utilities/VE/NWWI Selangor Concession, water supply Puncak Niaga/VE Malacca Concession, water supply VE Johor O&M/Concession, water SAJ Holdings/RWE Kertih 20 year industrial water outsourcing VE Penang BOT, water treatment PBA Kedah Concession, water supply Taliworks Selangor Concession, water supply SPLASH Nationalcontracts Industrial effluent treatment Eco Water Negeri Sembilan 10 year water distribution Salcon O&M



City Study: Kuala Lumpur Water provision is managed by the Selangor Waterworks Department. The central area of the city has a population of 1.145million, all of which are served by a total of 0.675million connections. Metering is commonplace. In 1993, the average domestic tariff was US$0.327 per m³, compared with a cost of water production of US$0.627 per m³. In consequence, cross subs idies come from domestic and industrial water users paying more then the economic cost. Water quality is considered to be fair, with the treatment capacity in 1993 covering only 39% of water produced for the city. Another problem is low water pressure. 25% of the city is currently covered by a sewerage system, with the rest using septic tanks. Treatment of effluents is understood to be minimal. As a result, there has been a gradual privatisation of water and sewerage services for the city since 1993. Sewerage has been taken over by Indah Water, which in turn is gradually developing a network of sewage treatment works. Bulk water provision comes in part from the privatisation of Selangor’s water services to Puncak Niaga and Vivendi. The privatisation of actual water services to the city is now actively under consideration. As noted above, billing and commercial versus developmental concerns are the main issues that need to be resolved before the formal contract award process takes place. Conflict Study: Raw water supplies to Singapore A series of agreements drawn up between Singapore and Malaysia from 1927 to 1990 set out terms for the provision of bulk water from Johor to Singapore until up to 2061. These tariffs have become the subject of a dispute initiated by Malaysia. The water infrastructure has been developed by Singapore, which is also responsible for its operational costs. Under the 1961 agreement, Malaysia supplies Singapore with raw water at RM0.03 per 1,000 gallons and Singapore in turn supplies Malaysia with treated water at RM0.50 per 1,000 gallons at a rate whereby both tariffs are effectively cancelled out. Malaysia is currently proposing that from 2011 it will provide Singapore with treated water (from the facilities developed by Singapore) at a cost put at RM0.45-0.60 per 1,000 gallons in 2000-01, rising to RM3.00-8.00 during 2002, before negotiations broke down. The state of Johor aims to become self sufficient for treated water by 2004, thereby decoupling the import/export element of the original agreement. Singapore is currently reducing its dependence on imported water from Malaysia through wastewater reclamation (‘NEWater’) and desalination and is considering proposals to pipe in water from Indonesia.

Private sector company operations (Please see the relevant company entry for details) Company Parent company Population served (country) Water Sewerage Total CGE Utilities VE (France) 5,600,000 0 5,600,000 Ondeo Suez (France) 1,565,000 0 1,565,000 SAJ Holdings RWE (Germany) 2,600,000 0 2,600,000 Intan Utilities Intan Utilities (Malaysia)/VE 600,000 0 600,000 Puncak Niaga PN/Central Plus (Malaysia 4,100,000 0 4,100,000 Taliworks Tailworks Bhd (Malaysia) 500,000 0 500,000 PBA Bhd PBA Bhd (Malaysia) 1,260,000 0 1,260,000 SAJ Ranhill Bhd (Malaysia 2,000,000 0 2,000,000 Eco Water Eco Water (Malaysia) N/A N/A N/A SPLASH KSB (Malaysia) 0 0 0 Salcon Salcon (Malaysia) 500,000 0 500,000

Sources: Keong, L M (2002). Asia Water, 18 (2), p 8-11. Malaysian Water Association: Malaysia Water Industry Guide 2002 Malaysia’s big moment. GWI, March 2004, pp 19-21

MALI PART 2: COUNTRY ANALYSIS


MALI In 1987, 25% of Mali’s 283,000 urban housing units had direct access to piped water, 17% with water piped to the inside of the unit and 8% with water available outside. In the capital Bamako, 26% of households were connected to piped water in 1993, while 2% had direct access to sewerage. The city had no sewage treatment. Overall, 46% of the urban population was considered as having suitable access to potable water in 1996 (against 41% in 1991) and 58% as having access to adequate sanitation. In 1987, 1.3% of all households were connected to flush lavatories. By 2000, 27 of the 34 towns with more than 10,000 people had formal water systems, covering 52% of the population. Average water consumption in 2000:

Less than 2,000 people 20L per day 2,000 – 5,000 people 31L per day 5,000 – 10,000 people 31L per day 10,000 + people 45L per day

In October 1994, the Government of Mali signed a four-year delegated management contract for water and electricity services with the SHEC Group after an international tender. SHEC consists of SAUR (30%), EDF (30%), Hydro-Quebec (30%) and CRC-SOGEMA (10%). The contract is based upon a fixed fee relating to the time spent by SHEC on the contract with a performance-related element built into the contract. This contract has been in effect similar to a consulting or technical assistance contract. Staff pay levels have been maintained or improved while there has been no corporate restructuring programme. Indeed, a series of performance-related bonuses have been paid. At the same time, no tariff rises for water services were requested. This contract has restricted itself to addressing those areas where private sector advice could make the most dramatic impact to service efficiency. In fact, by 1999, water production had increased by 24% since 1996 while water prices have been cut.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Urban areas 20 year. concession, water provision SAUR


Water Sewerage Total SAUR Bouygues (France) 115,000 0 115,000

MEXICO PART 2: COUNTRY ANALYSIS


MEXICO The privatisation of Mexico’s water and sewerage services was intended to be one of the major stories of the late 1990s, although the 1994-95 Peso Crisis did not help matters. Since 2000, there has been a political impasse between the Federal Government and the Provinces, partly due to the emergence of an effective two party system. A number of medium sized schemes are now succeeding in mobilising investment again.


Regulation and national plans The National Commission for Water is responsible for developing and enforcing a series of five year water plans. The current plan (PROMMA) runs from 2001-2006 and aims to provide potable water to 89% of the population with 65% of household wastewater being treated. The Commission for Water and Drainage for Metropolitan Areas is responsible for water and sewerage management in urban areas. The major laws are the General Law on Environmental Protection (1988 and revised in 1996), and the National Water Law (1992 and supplemented by the 1994 Regulations for the National Water Law). The Ministry for Social Development has imposed taxes for effluent discharges. The National Water Law also introduced the concept of tradable water rights. The 2001-06 National Water Plan: 2001 Actual 2002 Actual 2006 Plan % connected to piped water 88% 88% 89% % connected to sewerage 76% 77% 78% Wastewater treated [1] 23% 28% 41% Water & pollution permit compliance 7% 26% 100% Levies, fees & taxes (MXN million) 6,150 6,337 7,094 [1] The original PNH 2006 wastewater target was 65%. Source: PNH 2006, in OECD (2003) OECD Environmental Performance Review: Mexico

Inland water quality 2000 Good 5% Fair 22% Poor 49% Bad 24%

25% of the country’s surface has adequate water supplies, which enjoy 82% of the rainfall. Most of the population lives in the arid areas. According to the Environment Minister in 2001, Mexico has 60% less water per capita than 50 years ago, 73% of its supply is contaminated and 93% of its rivers are polluted.


Water provision and public health In Mexico City, water connections were 92% (64% indoors) and access to sanitation was 90% with 68% having access to flush lavatories. By 1995, water and sewerage connections were 98% and 94% respectively. Urban water and wastewater services

1991 1995 2000 Piped water 76% 87% 87% Sanitation 75% 67% 73% Sewage treatment N/A 25% 24%

Under Mexico’s Standard NOM-001-ECOL-1996, all 139 municipalities with more than 50,000 people and industrial sites with a BOD5/sus pended solids generation of more than 3t/day are meant to have appropriate wastewater treatment by 2000. As of 2002, 24% of the population was connected to a sewerage system, with 27% of sewage collected is treated at 978 WWTWs, with 11% being treated to primary standard and 16% to



secondary standard. Meanwhile, 5.4km 3 pa of industrial wastewater is generated, with 15% treated (34% primary, 62% secondary & 4% tertiary) at 1,405 WWTWs, but only 503 operating in compliance with national standards. Effluent treatment, 1994-1999

(m3/second) 1994 1998 1999 Effluent discharge 261 291 320 Installed cap 42 63 67 Operating cap 32 41 42 Effective cap 14 29 N/A Effluent treated (%) 12 14 13

A water treatment programme was started in 320 municipalities in 1991 to reduce the risk of cholera. This involved 95% of municipal piped drinking water being chlorinated along with the prohibition of the discharge of untreated sewage effluents for market gardening. Only 30% of drinking water is fully treated. 225 out of 1,018 regional water treatment plants were in need of repair in 2001. Distribution losses are between 40-48%.

Urban Data Served by piped water 88% Litres per capita per day 380 Access to sewerage 74% With sewage treatment 15%

Investments and service plans Current income at US$1,503 million pa accounts for 42% of required financial resources. Money and management are at a premium. One challenge for municipal performance is that authorities typically last three years and water managers jus t two. Thus there is little management or political continuity. In addition, high levels of debt and the inability to generate cash for loan repayments meat that just 21 states and six municipal water works met the Mexico’s Federal loan criteria in 2003. The International Monetary Fund is disbursing US$1 billion in loans for water and sewerage projects, with US$1.4 billion being allocated to water and sanitation projects by the Ministry of Cities and total Government spending set to be in the region of US$1.66 billion, compared with US$800 million in 2003.

$million 2001-06 2007-12 2013-25 Capex 11,911 10,131 20,184 Opex 9,487 10,644 25,562 Total 21,398 20,775 46,796 Total – annualised 3,566 3,463 3,900

Various estimates point towards US$58-89 billion being required over a 25 year period to achieve universal and sustainable access to water and sanitation. While total spending has been boosted to US$2.2 billion pa since 2003, it is evident further investment is needed.

2000 2025 BAU 2025 SG Urban unaccounted for water 44% 44% 24% Drinking water service coverage 88% 88% 97% Sewerage service coverage 76% 76% 97% Wastewater treated 23% 60% 90% Investment (MXN billion pa) 14 16 30

BAU = Business As Usual Scenario, SG = Sustainable Growth Scenario Source: PNH 2006, in OECD (2003) OECD Environmental Performance Review: Mexico A series of measures to help preserve water supplies has been launched in a move that could help Mexico pay its Rio Grande river water debt to the USA under the 1944 treaty. A deal reached by U.S. and Mexican Governments earlier in 2003 said the two countries will invest in water conservation measures and mandates the modernisation of the water infrastructure, aiming to achieve greater efficiency in water use. Mexico also seeks to boost the amount of treated and reused wastewater from one-third of output to two-thirds by 2006. Other challenges stem from Mexican politics and their several legacies. Since the 2000 elections ended 71 years of rule by the Institutional Revolutionary Party, there has been a piecemeal transition from a centralised state to one with more local decision making, but without an effective transfer of operations. While in constitutional terms, water belongs to the state, this does not allow for the economic and environmental opportunity costs involved when water is transferred from one state to another or to Mexico City. Meanwhile, up to half of users do not pay for the service, health regulations stipulate that at least a minimal supply must be maintained to domestic non-payers.



Freshwater Annual availability (1998) 375.40km³ Per capita 3,729m 3 Annual withdrawal (1991) 77.8km³ Domestic 17% Industrial 5% Agriculture 77%

Politics and privatisation Mexico has a long tradition of private sector water contracts. Concessions were awarded in Pueble, Saltillo and Monterrey in 1855, 1899 and 1904 respectively. In the 1920s there were 20 concessions in operation. Since the 1940s, these were taken over by the state. Privatisation in Mexico was revived in the wake of the 1992 National Water Law. At the same time, Federal support for water and sewerage services in the provinces was eased to encourage the commercialisation of the services. After strong progress between 1992 and 1994, economic problems have meant that progress in subsequent years has been piecemeal. Many of the current generation of privatisation contracts were awarded shortly before the 1994 Peso crisis, which caused problems with regards to the quality of earnings in hard currency terms. Contracts such as Biwater’s sewage treatment BOT in Puerto Vallarta have suffered from the inability of anticipated tariff increases to be imposed. Companies such as Biwater have concentrated on working within new financial constraints to deliver high service quality with the longer term in mind. 50 wastewater treatment BOT contracts were awarded up to the end of 1999. In 2001, twelve were operational (with a PE of 6million), while 20 have been cancelled and twelve are under re-negotiation. Azurix entered the market in 1999 by buying out private sector stakes in two concessions. Azurix’s activities were sold to Suez in 2002. Likewise VE has gradually increased its holding in its Omsa JV from 33% in 1993 to 50% by 1998. From 2003, the Government aims to award concessions for 180 cities with a population over 50,000. This will cover water treatment and provision services, with 49%, 51% and 100% stakes being available. In reality, five BOT contracts awards were identified in 2003 and a further four in the year to date. Even so, a marked increase in local companies bidding for contracts points towards healthier conditions than for some time.

Groundwater Annual availability (1998) 139.0km³ Per capita 1,450m 3 Annual withdrawal (1985) 24.0km³ Domestic 13.2% Industrial 23.0% Agriculture 63.8%

Privatising sewage treatment Private sector involvement is also being sought for wastewater treatment. 16% of Mexico’s sewage treatment capacity is handled by the private sector, involving a total investment of US$400 million (the 1999 figures are Government estimates).

Sewage treatment in Mexico, 1994-99 1994 1995 1996 1997 1998 1999* Effluent discharge (m 3/s) 261 272 277 284 291 320 Installed treatment capacity (m3/s) 42 48 51 57 63 67 Operating treatment capacity-nominal (m3/s) 32 41 33 39 41 42 Operating treatment capacity-adequate (m3/s) 14 17 20 25 29 N/A Effluent treated (%) 12 15 12 13 14 13 Treatment operating adequately (%) 33 35 39 44 46 N/A

MAJOR CITIES City 2000 2015 Status Ciudad Juárez 1,239,000 1,781,000 N/A Culiacán 750,000 892,000 N/A Guadalajara 3,697,000 4,265,000 N/A Leon de los Alta 1,293,000 1,654,000 N/A Mérida 849,000 1,038,000 N/A Mexicali 771,000 954,000 N/A Mexico City 18,066,000 20,434,000 Four water management contracts awarded Monterry 3,267,000 3,906,000 N/A Puebla de Zarago 1,968,000 1,997,000 Water and sewerage privatised Querétaro 798,000 1,079,000 N/A San Luis Potosi 857,000 1,046,000 N/A Tijuana 1,297,000 1,937,000 N/A



MAJOR CITIES City 2000 2015 Status Toluca 1,455,000 2,707,000 N/A Torreon 1,012,000 1,157,000 N/A

Case study: Siapa Guadalajara’s municipal utility Sistema Intermunicipal para los Servicios de Agua Potable y Alcantarillado (Siapa) plans to spend U$700 million on improving water and wastewater services over the next 25 years. This will cover drinking water and wastewater management for the 3million people in Guadalajara, Zapopan, Tlaquepaque and Tonala. Water will be brought from Lake Chapala, leakage will be reduced and seven WWTPs will be built. Support will come from the Japanese Government and the Inter-American Development Bank. In addition, the municipality’s investment grade debt rating will be used to mobilise new debt when cash flow allows. Siapa provides drinking water to 93% of the Guadalajara region and wastewater services to 89%. It had revenues of 1.5billion Pesos (US$140 million) in 2002 and is profitable, with a steadily improving debt profile. Finances have been improved by adopting fixed tariffs to avoid metering abuse and charging for wastewater services. Siapa spent US$50 million in 2002 implementing a plan to measure water leakage in order to control and improve water pressure.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Aguascalientes 30 year water and sewerage concession Caasa (Omsa) Cancun 30 year water and sewerage concession DHC Chiuahua 10 year sewage treatment BOT Atlatech (Cygsa) Culiacan Sewage treatment facility concession TECSA León Sewage treatment work BOT Suez Matamoros Industrial effluent treatment BOT Suez NE Mexico City 10 year water management contract Industrias del Agua NW Mexico City 10 year water management contract Servicos de Agua Potable (Omsa) Pemex 4 industrial WWTW plants for Pemex CYDSA Puebla Sewage treatment facility concession TECSA Puebla Water and sewerage concession Omsa Puerto Vallarta 15 year sewage treatment BOT CTAPV Saltillo 25 year water and sewerage concession Empresa Paramunicipal SE Mexico City 10 year water management contract Tecnologia y Servicos del Agua SW Mexico City 10 year water management contract Agua de Mexico Torreón Sewage lagoon BOT Suez Xalapa Water & sewerage DBFO Earth Tech Orizaba Water & sewerage DBFO Earth Tech Morelia Water & sewerage BOT Aquasol Pachuca Water & sewerage BOT Aquasol San Luis Potosí Wastewater BOT Degremont/Suez


(country) Water Sewerage Total CTPAV Cascal (UK/Ned) 0 300,000 300,000 Industrias del Aguas Suez (France) 2,000,000 0 2,000,000 DHC Suez (France) 430,000 430,000 430,000 Suez Suez (France) 0 2,100,000 2,100,000 Omsa VE (France) 7,800,000 4,300,000 7,800,000 Agua de Mexico United Utilities (UK) 2,000,000 0 2,000,000 T y S del Agua (TECSA) Suez (France) 2,800,000 0 2,800,000 Aguas de Cancun Suez (France) 383,000 383,000 383,000 CYDSA CYDSA (Mexico) N/A N/A N/A Empresa Paramunicipal Agbar (Spain) 650,000 650,000 650,000 Earth Tech Tyco (USA) 400,000 500,000 500,000 Aquasol Aquasol (Mexico) 0 500,000 500,000

Sources: World Bank (2002). Private Solutions for Infrastructure In Mexico. Country Framework Report for Private Participation in Infrastructure. World Bank and Public-Private Infrastructure Advisory Facility. OECD (2003) OECD Environmental Performance Review: Mexico. OECD, Paris, France .

MONGOLIA PART 2: COUNTRY ANALYSIS


MONGOLIA Mongolia is characterised by the extreme contrast between the urbanised areas, which accounted for 64% of the country’s 2.7million population in 1998 and the rest of the country, where low-density nomadic pastoralism remains commonplace. In the central region there are substantial water resources, partly in the form of large, fast flowing streams. However, in the desert south, western and eastern provinces, the water resources are much scarcer and are generally of poorer quality with increasing salts and diminishing water levels in groundwater tables, streams and lakes. In 1999, 70% of the urban population had access to improved drinking water and 30% to sewerage. Political change brings the prospect of change The Communist administration lost the 1996 general election to the Democratic Coalition, ending 72 years of one party rule. In consequence, Mongolia is seeking to expand its international activities, especially with economies other than the former Soviet Union and the People's Republic of China. A privatisation programme was started in 1997, which may well embrace urban water and sewerage services but there are no significant developments to date. Water resource management The Ministry of Nature and the Environment is responsible for water resource use, management and development strategies. Under the Ministry there is an Agency for Environment Protection, which maintains national co-ordination and monitoring of the water resources. The Governor's offices of the Aimag and municipalities are responsible for water supply and wastewater treatment. The Mongolian Law on Water was enacted in 1995. Water resources management, monitoring and controls have failed to maintain water quality and supply, and generally have only documented the loss of resource reserves and quality. High rates of leakage are usual, while inefficient supply systems generate higher flows that in turn overwhelm sewage treatment systems. In addition to the waste of water, this overloads the sewage system and more than doubles the electricity requirements for operating the water supply pumps. Agricultural, rural residential and indus trial uses of groundwater in Gobi, and western and eastern Mongolia, are contributing to low water table levels and increasing salinity levels. There is an urgent need to improve water monitoring activities throughout the country. Water quality tests have been conducted in 14% of the country's 20,000 bored wells, although a number are currently known to be contaminated. Actions to improve the supply and reduce the waste/leakage of water in urban areas include the introduction of meters for each apartment block in Ulan Bator (Ulaanbaatar) and a graduated, steeply rising tariff for excessive per capita consumption of water. In addition, the World Bank is supporting an emergency leak repair programme through a US$39 million loan in 1996 and has financed a series of service improvements that were completed in 2001, including a new service reservoir for Ulan Bator. The ADB organised a US$8.5 million aid and loan package in 1997 to provide improved water supply to 125,000 people living in informal settlements in five provincial capitals. Water and sewerage services In 1996, 20% of domestic and industrial effluents, or 119.2million m3 were treated in 121 sewage treatment works, with 35 million m3 of wastewater discharged into the natural surface water without any treatment. There is no recycling of wastewater. In total, some 70% of urban sewage is treated, while domestic wastewater in rural areas is mostly discharged into the environment without treatment. The overall sewerage coverage is about 25%. In the capital Ulaanbaatar, 90% had access to safe drinking water in urban areas and 74% to sanitation in 1995. Identified areas of concern in 1997 included an emergency leakage repair programme, allied with water metering on at least the apartment block level. Distribution losses in Ulan Bator have been estimated at 60%.

MOROCCO PART 2: COUNTRY ANALYSIS


MOROCCO Since 1995 Morocco has adopted an aggressive attitude towards privatisation, awarding the Casablanca contract on a multi utility basis, also seen in Rabat and a number of other cities over the next two years. The adoption of a multi-utility contract has allowed investment to be focussed towards sewerage and sewage treatment development, while allowing this work to be partially funded by electricity revenues.


Management A national plan for water and water resource management was adopted in 1995. This has been augmented with regional and city based plans for the larger urban areas. The emphasis remains on irrigation issues, but there is an increasing concern about the need for sewerage and sewage treatment infrastructure.


Service coverage In 1985, 63% of urban households had piped water, compared with 2% of rural households. 90% of urban households had lavatories of some description, compared with 19% of rural households. In 1983 87% of households in Rabat had access to potable water and 95% had access to adequate sanitation, but none of the sewerage effluents were treated. The Moroccan Government is seeking to mobilise an additional 6.2billion m3 of water pa on top of the current withdrawal of 13.9billion m3 pa by 2020. Connection to piped water in urban areas was planned to rise to 90% in 2000 and to 98% by 2020. 80% of the rural population is to be connected to piped water by 2005. In 1997 PAGER, a rural water provision programme was launched. It is seeking to serve 11million people in 31,000 localities through the rehabilitation of 30,000 water storage units, installing or renovating 20,000 water pumps and developing 1,300 local water sources. The rate of sewerage connections in urban areas is to be improved to 90% in 2005 and 95% by 2015. All major urban centres are to be provided with primary treatment by 2005, with these facilities being upgraded to secondary or tertiary standard between 2005 and 2015.


Pricing policies Domestic water is provided for DH30 per year where usage is below 24m 3 per annum, except in Casablanca and Rabat, where it costs DH84 and DH74 respectively. Since 1996, measures have been taken to discourage excessive domestic usage by bringing in additional charges for usage above the basic quantity. These are DH2.47 per m3 in Méknès and DH7.15m 3 in Casablanca for 24-60m 3 pa and DH9.87 per m3 in Casablanca for more than 60m 3 pa. Industrial tariffs in 1996 raged from DH1.59 per m 3 in Méknès to DH6.01 per m 3 in Safi.

Freshwater Annual availability (1998) 30.0km³ Per capita 1,071m 3 Annual withdrawal (1993) 11.1km³ Domestic (1992) 5% Industrial (1992) 3% Agriculture (1992) 92%

MOROCCO PART 2: COUNTRY ANALYSIS


Privatisation proposals and progress Since the enactment of the 1995 National Water Plan, Morocco has sought to privatise most of its major urban utility services and has been notably keen to attract international management and finance. To date, 35% of the urban water and sewerage sector has been privatised, with the privatisation of a further 25-30% under way.

Groundwater Annual availability (1998) 7.5km³ Per capita 268m 3 Annual withdrawal (1985) 3.0km³

Casablanca and Rabat In 1997, Lyonnaise des Eaux de Casablanca (Lydec) was awarded the 30 year Urban Community of Casablanca (UCC) concession contract. This was part of the overall privatisation of Casablanca’s urban services, which is described in the Suez entry. The water contract is worth DH5 billion (US$517 million), for the expansion and upgrading of water distribution and treatment. 75% of the population is currently connected, which will increase to 85% in 5 years, 95% in 10 and 100% in 25 years, price rises were seen in years 2 to 5. The wastewater contract is worth DH16 billion (US$1.6 billion). It involves the construction of three WWTWs, including recovery systems and the creation and extension of the sewerage network in development zones of western Casablanca. Currently 7% of the population is connected to the sewerage network. In 1998, Lydec water and sewerage accounted for US$100 million in turnover (30% of the total) and 60% of investment, reflecting the need to upgrade and extend the city’s water and sewerage services. The privatisation of Rabat utility services was awarded to Electricidade de Portugal and Pleiade (Portugal), Alborada (Morocco) and Urbaser (Dragados), with a 30 year concession. Rabat’s utilities serve 1.7million people, with a €138 million (US$130 million) turnover for water, sewerage and electricity services in 1998. In 2002, Dragados sold its stake to Vivendi Environnement.

MAJOR CITIES City 2000 2015 Status Casablanca 3,541,000 4,862,000 Water and sewerage services privatised Rabat 1,496,000 2,105,000 Water and sewerage services privatised Fes 907,000 1,300,000 PSP plans postponed Marrakech 822,000 1,210,000 No plans announced

Further privatisations under way Water and electricity services to Fez and Méknès were due to be privatised in 2001. Fez (1.3million people) had an approximate turnover of €108 million pa in 2001 and Méknès (0.6million people) will have a turnover of perhaps half of this. This privatisation has been delayed.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Casablanca Water and sewerage services Lydec Casablanca Bulk water provision concession Lydec Rabat Water and sewerage services VE Tetouan & Tangier 25 year water and sewerage concession VE


Water Sewerage Total Lydec Suez (France) 2,800,000 300,000 2,800,000 VE VE (France) 2,900,000 450,000 2,900,000

MOZAMBIQUE PART 2: COUNTRY ANALYSIS


MOZAMBIQUE After two decades of civil war ending in 1995, Mozambique’s economy and infrastructure have been devastated. As a result, since 1995, the country has been open to all initiatives that might improve its water and sanitation services in an affordable manner. 25% of Mozambique’s 18million people have access to safe water. In rural areas, 80% of the population does not have access to safe water. An epidemic of 10,000 cases of cholera, which broke out in August 1997, killed 400 people in a few months, underlining the problems facing the country’s water and sanitation services.


The National Water Plan Mozambique unveiled a National Water Development Plan in 1995. It acknowledged that many of the assets of the sector are either not functioning or are likely to fail in the near future, while the majority of the population still does not have access to a regular supply of safe drinking water. The Plan states: to permit services to be financially viable, the price of water has to reflect its economic value, eventually covering the cost of supply; water resources management will be decentralised to autonomous catchment authorities and water supply and sanitation services are to be decentralised to autonomous and financially self-sufficient local agencies. The Government’s role will therefore be restricted to setting priorities, defining minimum service levels, and the regulation of the activities of the service providers, including overseeing any planned privatisation processes.


The role of the state The Water Law of 1991 defines the institutional and legal framework for licensing and allocation of water concessions. Under this law, the National Water Council (CAN) provides inter-sector co-ordination and strategic decision making. Infrastructure development for the extension of coverage service and the corresponding investments will remain the responsibility of the state for the foreseeable future. On the other hand, management or operation of the water supply systems will, in principle, be carried out in a financially viable way and will be independent of the civil service.


Urban water and sanitation According to the Public Works and Housing Ministry in 2003, Mozambique needs more than US$1 billion to meet the millennium target of reducing by half the people deprived of clean drinking water and basic sanitation by 2015. The National Statistics Institute found in 2001 that 37% of the population has access to piped water or a protected well and 50% had access to basic sanitation facilities. Of the total urban population, 35% have access to safe water supplies. In 1980 the coverage was estimated to be about 48%. The 1995 Plan’s objective was to increase the coverage so that 50-80% of the population is supplied with safe drinking water by 2002. In 1999, 81% of the urban population had access to safe drinking water and 68% to improved sanitation. All water companies had a target to supply at least 50% of the population by then. The target for Maputo, the capital city, is 60%, and higher targets have been set for Xai and Chokwe (70%), Inhambane (75%), Pemba and Tete (80%). If these targets are achieved an extra 1million people will be served. Most of the expansion will be in the peripheral areas, where the proposed quality of service is one standpost with two taps per 500 people. The target coverage for the various levels of service is 30% by standpipes, 25% with yard connections and 20% with house connections. To achieve these targets water losses will have to be reduced from about 40% to less than 25%. Capital spending for these targets is estimated at US$30 to 35million pa, against US$20 to 25 million pa in recent years. Tariffs were adjusted in 2000 to cover operation, maintenance costs and 50% of depreciation costs. Full cost recovery is aimed for 2003.



For sewerage in urban areas, short term investment will concentrate on the rehabilitation of the existing sanitation infrastructure, especially in cities with poor sanitary conditions such as Tete, Quelimane, Beira and Maputo at a cost of US$5-10 million pa. By the year 2000, urban sanitation taxes should be introduced in all the major cities to cover operation and maintenance costs. In 1995 approximately 100,000 urban families had latrines. The official target was to increase this number to 200,000 families by 2000.

Freshwater Annual Availability (1998) 100.0km³ Per capita 5,350m 3 Annual withdrawal (1992) 0.61km³ Domestic (1992) 9% Industrial (1992) 2% Agriculture (1992) 89%

Rural water provision Sufficient water sources were constructed to increase the coverage of supply to the rural population from 6% in 1980 to 30% by 1993. A 1999 survey pointed to 26% coverage that year against a Government target of 40% by 2000. The level of service is where a shallow well or borehole equipped with an operational hand-pump will serve 500 people in a radius of not more than 500 meters. These targets imply the construction of around 6,000 new water sources to serve an additional 3million people. To carry out these activities an investment of about US$15 to 20million pa will be required between 1995 and 2000, compared with the previous level of US$4-9 million pa.

Groundwater Annual availability (1998) 17.0km³ Per capita 910m 3

Privatisation and players In 1998, Halcrow carried out an assessment of the water systems in Maputo, Beira, Quelimane, Nampula and Pemba. This study was designed to formulate the basis for including the private sector in the operation of these water systems. Halcrow found that tariff increases would not be affordable outside Maputo in the medium term and that finance needs to be raised through improving the efficiency of the services, allied with leakage reduction and increasing the number of people paying for these services. In 1998, the Government announced that water provision services for Maputo, Beira, Quelimane, Nampula and Pemba would be privatised on a lease (BOT) basis for Maputo along with management contracts for the other four cities. The contract also involves the commercialisation of water services for Maputo's neighbouring industrial city of Matola and Beira's neighbouring city of Dondo. US$120 million is to be invested over the first five years of the contract on upgrading facilities. The contract is linked to US$117 million in donor funding, US$92 million of the initial donor grant is for the service expansion programme, with the remaining US$25 million for operating the services. The World Bank, African Development Bank, Dutch Government and the European Union funded the grant. The contract was awarded in September 1999 to Aguas de Mocambique (ADM), a consortium consisting of SAUR (38.5%), IPE-Aguas de Portugal (31.5%) and the Mazi-Mozambique consortium (30%). Mazi-Mozambique is led by the Mozambique Community Development Foundation, an NGO and includes local private companies Norte Investimentos, FLOTUR and MG-Mozambique Gestores. The consortium forecast a US$50 million turnover over the first 5 years. The contract grants ADM a full commercial concession in Maputo and Matola for 15 years and similar concessions in the other five cities for five years.

MAJOR CITIES City 2000 2015 Status Maputo 1,092,000 1,899,000 BOT lease contract for water provision

International finance

The first World Bank water project to take place in Mozambique was given the go-ahead in February 1998. This involved a US$36 million credit to assist the Government to improve water supply and sanitation in rural and urban areas. This project will lay the groundwork for an increase in the quality, coverage, and sustainability of water supply and sanitation services through new systems and encouraging privatisation policies. The Mozambique National Water Development Project’s total cost of US$56.9 million will be financed by a US$36.0 million IDA credit and co-financed by the Government of Mozambique and various bilateral institutions. In June 1999, the African Development Fund (ADF) loaned US$26.44 million for a water supply rehabilitation project in Maputo. This project is concentrating on water supply and sanitation systems to bring these to the unserviced areas of the Hulene/Laulane/Mahotas suburbs of Maputo. The project concentrates on rehabilitation and extension works to the existing water supply system to increase the filter capacity at the water treatment, distribution and upgrading works as well as the installation of an additional water storage facility. The total cost of



the project is estimated at US$31.9 million. The work is being carried out by the Ministry of Public Works and Housing and ran for three and a half years from September 1999.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Maputo/Matola 15 year water provision BOT Aguas de Mocambique Beira/Dondo 5 year water provision BOT Aguas de Mocambique Quelimane 5 year water provision BOT Aguas de Mocambique Nampula 5 year water provision BOT Aguas de Mocambique Pemba 5 year water provision BOT Aguas de Mocambique



Aguas de Mocambique Bouygues (France) 2,5000,000 0 2,500,000

NAMIBIA PART 2: COUNTRY ANALYSIS


NAMIBIA Water and was tewater assets and services are relatively advanced due to the German colonial legacy and the need for active water management in an extremely arid country. Of the 533,000 people living in urban areas, 341,000 have household water connections and 75,000 are served via standpumps. 96% of the urban population has some form of sanitation, with 349,000 having access to the sewerage network. Namibia aims to have 97% urban sewerage coverage by 2010. Groundwater accounts for 73% of water resources. Only 3% of the country’s rainfall is used, due to the high rate of evapotranspiration. While Nam Water has been commercialised, privatisation has been restricted to new facilities and service extension. Nam Water has a turnover of N$250 million and an asset base of N$1,400 million, with an annual capital spending of N$150-200 million. An AA credit rating allied with cost recovery means that the entity is able to fund its current activities. The commercialisation of water supply in Namibia’s Windhoek Municipality has been based on cost recovery for those who can and developing a system of cross subsidies for the poor. This is being challenged in 2004 by a lobby who argue that water and sanitation ought to be free. The capital Windhoek is having its main drinking water treatment facility built and operated by Berlin Wasser International and Vivendi Environnement (now VE). The consortium will operate the water reclamation plant for 20 years. This facility is being financed by Germany’s KfW (construction) together with the European Investment Bank (EIB). The contract generates a turnover of €2 million pa. The capacity of the plant will be 21,000m 3 per day. This is nearly 50% of the city's total water consumption. The water supplies from the current central Namibian reservoir system and from wells has run too low. The city's long experience in the reprocessing of wastewater into industrial and drinking water could not be of any further help. 226,000 out of the city’s 271,000 people are served by household water and sewerage. All of Windhoek’s wastewater that is collected by the sewerage system is treated. In December 2002, the NAD100 million (€11.4 million) water reclamation plant for Windhoek entered service. This is the first multiple-barrier facility in which domestic sewerage is treated to produce potable water. Raw sewerage is initially pumped into the Gammams Plant before the semi-purified water is piped to the new plant for further treatment and chlorination.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Windhoek Wastewater treatment BW/VE



BW/VE Veolia (France)/RWE 0 135,000 135,000

NEPAL PART 2: COUNTRY ANALYSIS


NEPAL Water resources In general, water availability is good, with 8.02% of available resources being abstracted in 1995. While coverage in rural areas has improved from 1.58million (11%) in 1980 to 6.95million (38%) in 1990 and 10.70million (60%) by 1994, continued urbanisation has resulted in a fall in coverage in urban areas from 0.71million (80%) in 1980 to 1.20million (75%) in 1990 and 1.33million (64%) by 1994. There are no recognised sewerage facilities. Water management Water policy is overseen by the Ministry of Water Resources and the Department of Water Supply and Sewerage. Water and sewerage services in urban areas are operated by the Nepal Water Supply and Sanitation Corporation (NWSSC). In rural areas, including Kathmandu Valley, water projects are carried out at the village level, with financial and technical assistance from the Asian Development Bank and various international aid organisations. The NWSSC is regarded as being seriously underfunded, and is therefore having problems in maintaining its current assets, let alone expanding them. Pro Public (an environmental and human rights NGO) has brought a number of cases against the NWSSC demanding improved accountability, the elimination of alleged corrupt practices and the effective implementation of the 1992 Water Resources Act, which sets standards for drinking water quality that to date have not been met. The NWSSC operates in the urban areas of the Kathmandu Valley, providing water to 85% of urban areas, but only 20% of urban areas are connected to its sewerage network. Total water demand in the valley is es timated at 160 Ml/day and growing at 6% per annum, but water production varies between 90-130 Ml/day according to the season. 24 hour supply is understood to be the exception, alongside distribution losses of 30-40% and a bill collection rate of 70%. The US$464 million Melamchi Water Supply Project is intended to augment supplies by 0.27 million m3 per day by 2009 but has been delayed by the Maoist insurgency in the Melamchi River area. In August 1999, a case at the Supreme Court brought by Pro Public, resulted in a ruling demanding that Nepal's Ministry of Environment set national standards for sewage and effluent levels in water. This ruling follows an earlier decision commanding the Government to ensure that sewage is treated prior to discharge into the two main rivers that flow through the Kathmandu Valley. Nepal's 1997 Environment Protection Act makes the Government responsible for setting acceptable pollution reduction targets. Privatisation in the Kathmandu Valley Since 1997, the World Bank has been encouraging the Government of Nepal to consider proposals for the award of a ten year management lease contract for water and sewerage services for the Kathmandu Valley. The award process was revived during 2001 alongside two acts designed to enable PSP to take place. The Drinking Water Supply Act and the Drinking Water Monitoring and Tariff Fixation Commission Act were passed in 2002. The contract was expected to generate revenues of US$400 million. In 2003, the Asian Development Bank (ADB) gave a US$1.4 million technical assistance grant to support water and sanitation sector reform in the Kathmandu Valley, including the establishment of the National Water Supply Regulatory Board (NWSRB) and the Kathmandu Valley Water Authority, and a private sector participation scheme, this time based on an O&M contract. Japan has also provided a grant of JY927 million (US$7.57 million) for improvements to the water supply system in the Kathmandu Valley. A six year, extendible O+M contract, linked to US$100 million in capital spending and US$15 million in loans from the ADB was being prepared for the end of 2004. Five international companies have expressed interest in the proposal against one for the 2002 proposal. One difficulty is that tariff rises of 50% are anticipated in 2004-05, in part due to the cost of the Melamchi project. Sources: Global Water Intelligence, October 2001, pp 10-11. Asian Water, March 2004, pp 10-13.

THE NETHERLANDS PART 2: COUNTRY ANALYSIS


THE NETHERLANDS The Netherlands are sending out mixed signals regarding their role in global water management. While Nuon seeks to become an international service player, its home market is being closed to private investment. Even so, the Delftland wastewater treatment privatisation resulted in cost reductions of 30% below the original es timates.


Water management

The Dutch have been developing integrated water management systems since 1798, when the Directorate-General for Public Works and Water Management (Rijkswaterstaat) was founded. Two thirds of the country is truly man made and lies within two metres of the mean sea level. As their saying goes, ‘God created the world, but the Dutch created the Netherlands’. Almost all industrial wastewater is subject to secondary or tertiary treatment.


Water infrastructure and usage

There has been a consistent decline in the total abstraction of fresh water since 1970.

(million m3) 1970 1980 1990 Groundwater 1,157 1,008 1,049 Surface water 10,787 8,190 6,751 Total 11,944 9,198 7,800

Between 1975 and 1990, a national network of sewage treatment works was constructed, along with the connection of 97% of the population to the sewerage system by 1994. The proportion of the population connected to sewerage services increased from 73% in 1980 to 93% in 1990. There were 485 sewage treatment works in 1988, of which 64 serve cities with a population in excess of 100,000.

Sewage treatment 1980 1990 1995 1998 Tertiary 2.6% 4.4% 8.0% 78.1% Secondary 61.9% 74.4% 84.0% 19.6% Primary 7.9% 7.5% 1.0% 0.0% Sewerage only 14.5% 6.8% 2.0% 0.0% Not connected 14.1% 6.9% 5.0% 2.3%


There is an effluent discharge into surface waters of 13million PE via major rivers. The public sewage treatment capacity in 1987 was 22.7million PE. Proactive measures taken by the Government since 1985 resulted in an 81% decrease in BOD loads between 1970-92 and 73% between 1980-92. The system is being further extended as part of the compliance programme for the EU’s UWWTD by increasing the proportion of facilities offering tertiary treatment from 8% in 1993 to 35-50% by 2005.

Inland water quality (1986) Ia - Very Good 12% Ib - Good 65% II – Fair 18% III – Poor 4% IV –Bad 1%

In contrast, the 1990 survey quoted in ‘The Dobris Assessment’ (1995) has 5% of river waters as ‘Good’, 50% ‘Fair’, 40% ‘Poor’ and 5% as ‘Bad’. The figures are so different that it is to be assumed that they are not strictly

THE NETHERLANDS PART 2: COUNTRY ANALYSIS


comparable. The Netherlands continues to face pollution problems in the coastal areas due to the high effluent concentrations in the rivers Rhine, Meuse and Scheldt from Belgium and Germany. For example, the river Meuse is highly polluted and is a major source of nutrient pollution. The river Scheldt is the mos t polluted river flowing into the North Sea.


Costs and financing Until 1995, there was no charge for surface water abstraction by industrial users, while groundwater cost f 0.01 per m³. There is now a ground water tax of €0.168 and a domestic usage tax of €0.136 per m³. Total annual costs for municipal sewerage services are currently in the region of f1.5 billion. Maintenance work of f7 bill ion is currently needed, with f5 billion required to catch up on overdue maintenance work and some f2 billion to reduce storm overflows from sewage systems. Annual expenditure on water quality management is expected to rise over the plan period (1998-2006) by approximately 2.2% towards the end of the period. The total annual costs to municipalities as a result of these investments (totalling around f9 billion) are expected to amount to almost f2 billion in 2005, an average annual increase of 3.6% over the 1998-2006 plan period.

Over the 1995-2001 period, the water control boards invested f2 billion in water quality management, with total annual expenditure on the management of water quantity expected to rise by 0.2% pa over the 1998-2006 plan period. The Dutch Aquatic Outlook indicates that domestic water charges will increase as a result by around f 0.09 per m3 by 2015. The annual increase will therefore amount to less than f 0.01 per m3. During 1995-2006, sewerage charges are expected to rise by an average of 6% pa. In contrast, the pollution tax made itself felt during the early 1990s and during 1998-2006 the tax levy is expected to be restricted to an annual rise of around 2.4%. Overall water and sewerage fees will rise by f 75 per capita pa over the 1998-2005 plan period.

Groundwater Annual availability (1998) 4.5km³ Per capita 286m3 Annual withdrawal (1985) 1.1km³ Domestic 32% Industrial 45% Agriculture 23%

Privatisation prospects become confused

The 80 public water companies are currently being rationalised into 30 larger entities. In 1945, there were 208 companies, so this is part of an ongoing programme. In addition, there are a number of private permits granted to individuals, farms and industrial customers. The public sector is responsible for at least 95% of all water provision, with all private permits being on a localised basis. Nearly 100% of the population is connected to the public water distribution system, which is the highest share of all European countries. The construction of new water purification plants has become very important in recent years, due to the increasing problem of contaminated ground water (e.g. from agricultural and industrial activity), the main source for drinking water. In September 2000 a Bill was passed outlawed public water companies in the Netherlands from handing over shares or control to non-public bodies. Public water companies will retain exclusive rights to the production and distribution of drinking water in their distribution area. In consequence, if Noun is privatised, its Dutch water activities would have to be sold back to the state. In October 2002, the €1.5 billion Delftland wastewater treatment concession for the Hague was awarded to the Delfluent Consortium, led by Veolia Environnement (VE) (40%); two Dutch publicly owned water distribution companies, Delta Water (20%) and Waterbedrijf Europoort (20%); Rabobank (10%), Heijmans Betonen Waterbouw (5%) and Strukton(5%). The contract started in 2003 and involves operating the existing plant at Houtrust and developing the new €258 million plant at Harnaschpolder. VE (50%) will lead a JV, along with Delta Water (25%) and Waterbedrijf Europoort (25%) for operating the facilities and 90km of sewerage network. Delftland serves the Hague and surrounding areas. This will treat sewerage for 1.7million people. The 30 year contract involves €600 million of capital spending in total, designed to bring the region into line with EU standards to comply with the UWWTD by 2005.

MAJOR CITIES Population 2000 2015 Status Amsterdam 1,105 1,115 PSP illegal Rotterdam 1,078 1,082 PSP illegal

NEW ZEALAND PART 2: COUNTRY ANALYSIS


NEW ZEALAND In contrast to Australia, New Zealand typically enjoys an abundance of high quality water resources. However, there are areas with supply shortages, along with a poorly developed sewage treatment network for smaller towns and cities and problems relating to agricultural run-offs. Privatisation has made stolid progress to date.


Legislation The Resource Management Act 1991 emphasises the intrinsic values of ecosystem biodiversity and quality as a central component in water management, with the emphasis changing from multiple-use management to environmentally sustainable management. The Ministries of Health and the Environment produce water quality guidelines and standards, with the former responsible for monitoring drinking water supplies. The Sustainable Land Management Strategy, adopted by the Government in 1996 has concentrated on agricultural impacts on water quality. The allocation of water and groundwater management systems is the current area of government concern.


Inland water quality The Pupu Springs on the South Island have been described as possibly the clearest freshwater in the world. Their vertical clarity has been surpassed only at a few sites in Antarctic sea waters.

Good 40% Fair/Poor 40% Bad 20%

10-40% of New Zealand’s lakes suffer from some degree of eutrophication. More than 90% of the eutrophic lakes are in the North Island and these are usually linked to agricultural run-offs. Water provision There are 1,638 community drinking water supplies, serving 85% of the population. Of these, 7% (serving 54% of the population) are considered safe, while a further 2% (serving 5% of the population) are of borderline safety. However, 19% (serving 18% of the population) have an unsatisfactorily high risk of contamination. The remaining 71% of water supplies (serving 8% of the population) have not been graded because they are in communities of less than 500 people. Approximately 15% of the population are not connected to community supplies. Until the mid 1990s, demand for water was increasing steadily throughout New Zealand. From 1970 to 1990 the amount used by people in Wellington and Auckland increased by 25% and 32% respectively. Since the Auckland water crisis of 1993, and the adoption of water conservation strategies, Auckland’s water use has reverted to early 1980s levels or around 300Lper day, 21% down on the 1988 figure of 380L per day.

Urban Data Served by piped water 99% Usage (L/day) 350 Access to sewerage 90% With sewage treatment 80%

Development of sewerage services In 1950, New Zealand had five sewage treatment plants. By 1997 there were 220, with 80% of households connected to them. Surveys in 1976 and 1981 showed that just over 60% of the population were connected to sewerage treatment plants. Around 17% of the population had their sewage discharged untreated, mostly into the sea, and around 20% were not connected to a sewerage system at all, but relied on septic tanks. In the intervening decade, the percentage connected to treatment plants is believed to have risen to about 80%, while those discharging untreated sewage are less than 5%. Some 15–20% of people probably still use septic tanks.

NEW ZEALAND PART 2: COUNTRY ANALYSIS


Freshwater Annual availability (1998) 327.0km³ Per capita 88,859m3 Annual withdrawal (1991) 2.0km³ Domestic (1987) 46% Industrial (1987) 10% Agriculture (1987) 44%

Sewage treatment and effluent discharge A 1992 survey of 17 of the larger sewage treatment works found that BOD loading was reduced by 91% on average, suspended solids by 86% and faecal coliforms by 98%. Nitrogen and phosphate removal is generally poor, reflecting the lack of tertiary treatment. A 1991 survey of local authorities serving populations greater than 20,000 examined data on 74 sewerage systems which serve 2.5million people.

Treatment % of systems Tertiary 9% Secondary 50% Primary 41%

Two thirds of treatment plants serve communities with populations of less than 20,000.

Type of discharge Population 0ver 20,000 5,000-20,000 Sea discharge 25% 5% Estuary discharge 25% 3% River/lake discharge 37% 64% Recycling 14% 28%

Recycling sewage (discharge to land) typically only takes place where there is tertiary treatment or at small facilities. In 1976 and 1981, 60% of the population had their sewage discharged into estuaries, harbours or the sea. There is a broad shift in planning for the construction of more secondary and tertiary facilities so as to direct effluents away from river and coastal disposal to recycling.

Groundwater Annual availability (1998) 198.0km³ Per capita 53,804m3

MAJOR CITIES City 2000 2015 Status Auckland 1,102,000 1,403,000 Partial privatisation of sewerage

Privatisation New Zealand has to date adopted a somewhat ad hoc approach to privatisation. Two project-related contracts have been awarded, but the Government has stated that it is currently against privatising services for a city as a whole. It is likely that in the medium term, any further privatisations will be linked to sewerage expansion and upgrading schemes.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Pakapura District Water and sewerage concession United Water Ruapehu Water and sewerage BOT United Water Thames -Coromandel Water and sewerage BOT United Water Wellington Sewage treatment DBO AWI



AWI (NZ) Ltd. AWG (UK) 0 300,000 300,000 United Water RWE (Germany)/VE (France) 25,000 105,000 105,000

NIGER PART 2: COUNTRY ANALYSIS


NIGER In 2001, the World Bank lent Niger US$18.6 million as part of its Poverty Reduction and Growth Facility (PRGF) to commercialise various utility activities. This includes the privatisation of the national water company, SNE. Currently, 48% of the population has access to safe water, with formal water and sewerage provision in urban areas officially covering 70% and 79% of the population respectively. However, there is no formal urban sewerage network and most water provision is at the street pump level, with concerns about its potability. From 2004, 50 small town water supply schemes are to be rehabilitated and local private operators will take over their maintenance by 2005. Twenty-eight private operators and 50 Water Users Associations have been trained so far. In January 2001 Veolia Environnement (VE) was awarded a 10 year renewable lease contract for water services to Niger. VE has 51% of the equity and will spend €5.5 million in service extension and installing water fountains while the World Bank is leading a group of backers for a €35 million infrastructure rehabilitation programme. The first aim is to increase the number of connections from 58,000 over the next five years. Niamey (0.6million people) is the initial target area, with other addressable markets to be covered later. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Major Cities 10 year renewable lease VE In Niamey, 189,000 people are served through household water connections, 162,000 through public standpipes and 202,000 via water vendors. There is no piped sewerage, 28,000 being served via septic tanks and 482,000 via latrines. The average charge for household water connections is US$1.4 per month. Water vending and sanitation are carried out on an informal basis. Private sector company operations (Please see the relevant company entry for details ) Company Parent company Population served (country) Water Sewerage Total VE VE (France) 600,000 0 600,000 Source: (The first paragraph) WHO (2000). Water Supply and Sanitation Assessment.

NIGERIA PART 2: COUNTRY ANALYSIS


NIGERIA

Nigeria is one of the most challenging emerging international water service markets. Along with concerns about corruption, it is also a country characterised by political instability and ethnic and religious conflict. At the same time, the country’s size, oil revenues and burgeoning urban population cannot be ignored. The Federal Government of Nigeria spends US$300-US$500 million a year (1% to 1.5% of GDP) on environmental protection and resource programmes. According to the World Bank, the annual cost of environmental degradation in Nigeria exceeds US$5 billion.

Economics (2002) GDP per capita US$328 GDP per capita (PPP) US$860 GDP in Agriculture 39% GDP in Industry 33% GDP in Services 28%

Service coverage and delivery In 1993, 68% of households had access to piped water in Lagos (10.29million people in 1995), using an average 70L of water per capita per day. 2% of the city’s population is connected to sewerage, all of which nominally receives treatment. There is no sewerage or sewage treatment in Ibadan (population 1.48million in 1995), where 68% of households are connected to piped water, using an average 70L of water per capita per day. Officially 84% of the country’s urban population in 1996 had both access to safe water supplies and adequate sanitation. In reality, 50% of urban Nigerians (20% in unofficial urban areas) and 35% of rural Nigerians had access to potable water in 2003 and the urban figure may be 30% overall due to poor maintenance. The government seeks to improve this to 60% by 2010. The World Bank approved a US$120 million loan in 2004 to encourage the reform of urban water management.


Water provision is being commercialised Until recently, water was provided free of charge, with direct finance from the Government. Since the mid 1990s there has been a gradual move towards partial commercialisation, with marginal rates for water in order to allow the corporations to break even, although until recently profits were not allowed. Akwa Ibom Corporation (Akwa Ibom state) has been turned into a limited liability company as part of a US$73 million loan from the African Development Bank designed to encourage the commercialisation and reform of utility services in Nigeria. Of that state's population, 30% is connected to mains water, while in the state capital, 30,000 out of 50,000 customers are connected. The Akwa Ibom Corporation’s remit is limited to supplying water to urban areas with a population in excess of 5,000. The Ministry of Water Resources intends to increase water supply coverage from the current 40% to 60% by the end of 2003. In urban areas 180 water schemes have now been completed, increasing water supply capacity by 1.2 million m3 per day and restoring access to 10million people. A Government/World Bank pilot project on small towns water schemes had started in the states of Kogi, Akwa Ibom, and Bauchi, while three more schemes are planned in Ebonyi, Katsina and Niger states. The government aims to bear 50% of rural water supply and 30% of all urban water supply projects initiated by states from 2004. A survey in 1999 found bacterial levels in 90% of tap water samples taken in Lagos to be above WHO limits. This was taken as evidence for the readiness of people to buy bottled ‘pure’ water and thus to pay for potable water supplies.


Good water resources, sewerage problems 85% of Nigeria is regarded as having good water resources and storage capacity because of the six month rainy season. The country’s problem areas are in the north, close to the Sahara. Sanitation systems for Nigerian cities are inadequate. Despite the fact that water sanitation is a high priority for health and quality reasons, the Government has been unable to allocate funds in this area. Some 90% of industry in Nigeria does not have pollution control equipment of any sort. Most industries thus dis charge untreated effluent into adjacent water



courses either directly or through sewers. Where waste treatment plants exist, the capacities are usually inadequate or the plants have broken down due to poor maintenance or lack of spare parts.


Industrial effluent problems A central WWTP for industrial effluent exists in the oldest industrial estate in the country at Ikeja in Lagos. Established since the early 1970s, this plant has been inoperative since the mid 1980s. Industrial effluents pass through the facility untreated and discharge into the surface water. Lack of financial resources has stalled the rehabilitation and expansion of the plant. Although the guidelines and standards for industrial pollution control specify the establishment of central waste treatment facilities, in reality these facilities do not exist. Currently, the only sewerage system is in the new Federal capital Abuja. Other cities such as Lagos use latrines and cesspits. In the past, sewerage and sewage treatment was not a part of the water corporations’ remit.

Groundwater Annual availability (1998) 87.0km³ Per capita 714 m

Privatisation in prospect Until recently, it has been the standard in Nigeria to wait for a capital infusion through foreign aid or a Federal Government to rehabilitate or replace water and sewerage systems instead of maintaining the infras tructure. The shortfall of this approach led to the National Water Rehabilitation Project. In 1991, it was found that Nigeria’s water systems were working at 40% of their installed capacity. A US$256 million loan financed rehabilitation project ran from 1991 to 1998, working on over 250 individual water systems. However, declining financial resources are making this less feasible, and the rate and extent of deterioration is accelerating. The delegation of responsibilities between the state and federal governments remains a problem, with the Federal Government expecting state governments to implement their own development plans, even though budget allocations are controlled at the central level. According to the World Bank, seven states are currently suitable for PSP: Ogun, Enugu. Rivers, Plateau, Gombe, Kano and Kaduna. The World Bank has allocated US$245 million in funding for capacity building in these states. In each case, this will consist of US$5 million in emergency funding, followed by US$30 million in infrastructure development funding linked to a formal PPP process. In March 1999, the Nigerian Government indicated that water utilities were going to be included in the country’s privatisation plans. During 1999-2000, the IFC examined privatisation options for the Lagos state government. The main area of concern is how sewerage services can be commercialised. The aim is to attract investment of up to US$1.5 billion for the state’s water systems through PSP with Lagos and the Nigerian Environmental Protection Agency (NEPA) and then the six state water boards. VE, Suez, Thames (RWE) and Severn Trent have prequalified for the Lagos State Water Corporation privatisation process, which will generate US$2 billion in revenues over 25 years. Before this can go ahead, the legal framework to permit concession awards needs to be put into place. Adelegan & Adelegan (see sources, below), point out that while enhanced service delivery and extension will come about through PSP, and it will be a high risk market for private sector investors. Challenges include the difficulty of knowing how many people in fact live within the city, along with the profiling of spending and the relationship between Lagos and the Lagos State Water Corporation (LSWC). Capital spending requirements point to US$1.2 billion being needed during the first 15 years of a contract and US$2.5 billion over 25 years. During 2002-03, LSWC has undertaken the construction of 10 micro-waterworks costing NGN2.2 billion (€15.9 million) in various parts of the state. Private sector participation is being considered if there are no increases in tariffs. Guinness Nigeria has awarded a €3.8 million contract to Biwater (Pty) Ltd for the design, supply, installation, and commissioning of an effluent treatment plant at the Ogba Brewery in Lagos. Work started in October 2003 and will be completed in December 2004. MAJOR CITIES

City 2000 2015 Status Ibadan 1,549,000 2,542,000 Privatisation under consideration Lagos 8,665,000 15,966,000 Privatisation under consideration Ogbomosho 809,000 1,356,000 Privatisation under consideration



Case study: Kaduna State Water Board The state of Kaduna has a population of 2.7million with cities of Kaduna (1.5million) and Zaria (800,000). Currently the Kaduna State Water Board (KSWB) is a Parastatal, under the State Ministry of Water Resources, responsible for urban water supply. Assets have been vested in KSWB but the Ministry of Water Resources acts as a custodian to these. In 2002, households accounted for 76% of consumption and 21% of revenues, with a system coverage of 46% and unaccounted water at 38%. KSWB charges US$4.6 per month for households and 50% of bills are collected. In the regional context, the KSWB has a good record, but there remains much room for progress. The state is experiencing 3% pa population growth, and has a target for 100% service coverage by 2025. Capital expenditure of US$257 million is needed - US$38 million for rehabilitation, the rest for expansion. As a result, PSP was planned for 2002-03; the first for a state water board but little progress has been made. There are many challenges: low income levels, with many below the poverty line (US$1 per day), while service levels are bad and thus the willingness to pay is low. In addition, resistance to PSP is expected due to the threat of tariff increases and lay offs. The Government aims to use a lease contract as a stepping stone towards concessions in the longer term. Sources:

A Strategy for Restoring Urban Infrastructure and Services in Nigeria (1994). Document prepared by the World Bank, with Nigerian collaboration. Water Bulletin, 2nd April 1997. Adelegan O.J. & Adelegan J.A. (2001). Investment appraisal of the privatisation of water supply in Nigeria. 27th Wedc Conference. Wedc, Loughborough, UK.

NORWAY PART 2: COUNTRY ANALYSIS


NORWAY After years of delays and political infighting, two concession contracts have emerged in Norway. In both cases, it was an issue of finding the right privatisation model and seeking to meet Norway’s specific concerns over water and wastewater utility management.


Water and sewerage services Norway has an abundance of water and supply is adequate for domestic, agricultural and industrial uses. 87% of supplies are drawn from surface water. In 1994, withdrawals of ground and surface waters were 0.3% of available water. Domestic consumption was 260L per capita per day. Water is generally regarded as a free resource. There is no effective pricing for water abstraction by agriculture and industry. The water and sewerage sector has traditionally been seen as parts of the municipalities. Political change is starting to alter this picture. It now appears that privatisation opportunities will appear on a one-off basis, usually in relation to the construction of a new facility. The average household paid US$200 pa for water and US$300 pa for sewerage services in 2000.


Water provision A national programme for improving water supply was launched in 1995 with the goal of securing satisfactory and safe water from all waterworks supplying more than 100 people, some 85% of the population. For water purification, 500 new drinking water disinfection plants and 500 additional plants for colour removal are needed. At present, 65% of water is treated before being used as drinking water. The target is to increase this percentage to 100%.


Sewerage and sewage treatment Long term spending plans for upgrading Norway’s sewerage network are as follows: NKr10.0 billion for sewerage, NKr0.5 billion for sludge handling and NKr2.0 billion for treating industrial discharges. The proportion of Norway’s population connected to sewerage services increased from 34% in 1980 to 77% in 1990. Sewerage and sewage treatment

1980 1990 1995 1999 Tertiary treatment 26.0% 43.0% 51.0% 51.0% Secondary treatment 1.0% 1.0% 1.0% 1.0% Primary treatment 7.0% 13.0% 15.0% 21.0% Sewerage only 46.0% 20.0% 13.0% 7.0% Not connected 20.0% 23.0% 20.0% 20.0%

Norway has built a number of sewage treatment plants with secondary treatment in recent years, and secondary treatment is planned for all plants serving more than 2000 people. The capacity for wastewater treatment is about 5.4million PE. Currently, 67% of urban sewerage is treated. In 1997, Norway’s sewage treatment facilities removed 1,576 tonnes of phosphorus, some 64% of the estimated total intake at municipal sewage treatment plants and separate treatment facilities in sparsely populated areas. Around 80% of the population of Norway lives in areas with municipal sewage systems. In 1996, municipal sewage treatment plants released an estimated total of 563 tonnes of phosphorus. The average purification efficiency of municipal treatment plants was 72% and the rate for the entire country has been around 70-72% since the 1990s.

NORWAY PART 2: COUNTRY ANALYSIS


Freshwater Annual availability (1998) 384.0km³ Per capita 88,673m 3 Annual withdrawal (date) 2.0km³ Domestic 31% Industrial 15% Agriculture 54%

Groundwater Annual availability (1998) 96.0km³ Per capita 21,923m 3 Annual withdrawal (1985) 0.1km³ Domestic 27% Industrial 73% Agriculture 0%

Private sector players In 1995, the municipality of Bærum (located to the west of Oslo) turned its water and sewerage company into a limited company. The municipality is seeking to abolish metering and bring in fixed charges, along with selling a 49% stake to an outside investor. The original plan, to sell this stake to a JV between Suez and Kværner (Norway) fell through due to political resistance to the JV. In 1999, a concession was awarded to a consortium headed by Northumbrian Lyonnaise International as a JV with the municipality. Anglian Water International (AWI) was granted an option for an operations concession for a sewage treatment works serving 250,000 people in Oslo in 1999. The concession was awarded in October 2000. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Baerum JV water provision contract Baerum Vann Oslo Sewage treatment concession AWI Private sector company operations (Please see the relevant company entry for details)


AWI AWG (UK) 0 250,000 250,000 Baerum Vann Suez (France) 50,000 0 50,000

MAJOR CITIES Population 2000 2015 Status Oslo 779,000 836,000 Sewage treatment concession

OMAN PART 2: COUNTRY ANALYSIS


OMAN Oman was the first of the Gulf states to consider PSP beyond co-generation projects. This approach has resulted in two stalled privatisations to date and the principal of third time lucky is seen as being paramount.

Economics (2002) GDP per capita US$8,002 GDP per capita (PPP) US$13,340 GDP in Agriculture (1990) 3% GDP in Industry (1990) 58% GDP in Services (1990) 39%

Some 84% of Oman’s population live in urban areas, with 91% of the urban population officially receiving safe water supplies and 75% having adequate sewerage services in 1991. However, just 14% of Muscat’s sewage was treated in 2003. Oman has been the pioneer in utility privatisation in the Gulf since 1994. The Ministry of Electricity and Water was corporatised by 2001, along with the implementation of an independent regulator.

Population 2002(million) 2.8 2015 (million) 3.9 Urbanisation in 2002 77% Urbanisation by 2015 83% In urban agglomerations, 2015 0%

Water BOOT projects are intended to sell water to the Government, which will in turn sell this water on to customers, with its preferred level of subsidies. Five projects were outlined by the Ministry of Development in 1994, which have started to emerge as fully fledged BOOT concepts. The Government has ruled that BOOT contracts will operate via a locally based joint stock company. It is proposed that 40% of each BOOT’s equity is to be floated on the Oman Stock Exchange in Muscat: [1] Salalah WWTW BOOT [2] Al Massarat groundwater distribution BOOT, [3 Al Ashkara desalination BOOT, [4] Muscat WWTW BOOT and [5] Barqa power and desalination BOOT.


To date, the implementation of these plans has not been a smooth one. The Muscat wastewater treatment plant project has resulted in a 30 year BOOT concession being awarded to Cascal after SECTO withdrew in 2001. Cascal in turn pulled out and the process is being restarted.

Freshwater Annual availability (2000) 0.9km³ Per capita 388m 3 Annual withdrawal (1990) 1.2km³ Domestic (1987) 5% Industrial (1987) 2% Agriculture (1987) 94%

A new attempt at privatising the Muscat WWTE was underway in late 2004. It is a part of Oman’s plans to raise sewage treatment top 80% of the population by 2013 and to 90% by 2017.

Groundwater Annual availability (2000) 1.0km³ Per capita 376m 3 Annual withdrawal (1990) 0.4km³

The Government is also currently seeking to award a two year O&M contract for the Salalah wastewater treatment facility, leading to a 20 year operations contract. The plant will serve 134,000 people. It is intended that the Salalkah Sanitary Drainage and Services Company will be listed on the Muscat Stock Exchange. This in time is designed to open the way for privatising Muscat’s sewerage services.

PAKISTAN PART 2: COUNTRY ANALYSIS


PAKISTAN Pakistan slow return to political normality after the fall-out from various incidents between 1998 and 2002 has left reforming water and wastewater services somewhat in the lurch. In a sense, this is a respite, since it has allowed the Government to start addressing international concerns regarding corruption problems. Pakistan is likely to face political and economic isolation until a timetable for a return to civilian rule is put into place. Pakistan is understood to be preparing to resume its full scale privatisation programme, but no details have emerged about resuming the privatisation of Karachi’s water and sewerage services.


Privatisation and politics The Government was elected in February 1997 on a mandate for encouraging the privatisation of various utilities and industries under the auspices of the Privatisation Commission. The privatisation programme was temporarily halted with the suspension of foreign aid and finance to Pakistan in May 1998 following the resumption of nuclear testing by Pakistan and India. IMF and ADB lending to Pakistan was resumed in January 1999. However, the IMF is concerned about the financial difficulties of the Water and Power Development Authority, where it believes that the Government needs to finalise restructuring plans and restart its privatisation programme once economic conditions allow. In 2003, the United Nations (UN) recommended that water needs to be priced to reflect its cost in Pakistan and to end agricultural cross subsidies. The UN said 56% of the population had access to safe drinking water and 24% had adequate sanitation. Some degree of private sector participation was called for, but no further details were given. The Pakistan government has approved six water development projects worth US$1.7 billion (€1.5 billion) in September 2003.


The environment and politics In September 2003, General Musharraf called for Pakistan’s four provinces to develop an integrated plan for using water from the Indus, which flows through Sindh, the North West Frontier and Punjab, and to agree on the construction of at least two major dams on the river. This may have significant repercussions with India, which also uses the river. One site at Kalabagh is under consideration, while a feasibility study for a reservoir at Bhasha in the northern region would be completed in 2004. A National Conservation Strategy was set out in 1992, with a ten year investment plan. The plan has been found to be poorly defined and probably over-ambitious in terms of affordability and its ease of enforcement and monitoring. The 1983 Environmental Protection Ordinance is currently under revision. The federal Environmental Protection Agency (EPA) is seen as weak in comparison with Government departments that are seen to oppose environmental and public health related measures. The EPA in particular is lacking suitable monitoring and enforcement powers. In 1998, an Environmental Protection Council was set up, but it does not include members of the provincial environmental protection agencies and thus has little concrete effect with regards to influencing Government policy. This is demonstrated by the fact that the Government’s 1988-2003 Perspective Plan did not include environmental or public health concerns.

Urban Services Safe drinking water 53% L per cap per day 172 Access to sewerage 77% % Sewage treated 5%

Environment and public health issues In Baluchistan province, the groundwater table is decreasing by 2-3 metres every year as a result of a prolonged 3 year drought and wasteful irrigation methods. In Sindh province, the Council of Karachi's Industrial Associations

PAKISTAN PART 2: COUNTRY ANALYSIS


(CKIA) estimates that industries are losing production worth Rs100 million (€2.1 million) daily due to the shortage of water. In 2002, 45% of the rural population has access to clean water. In 1987, 51% of the urban population and 6% of the rural population had access to sanitation. In 2002, 38% of the population as a whole has access to piped water, but there are considerable reservations about its quality. 60% of infant mortality is understood to occur because of waterborne diseases. Data on environmental degradation is thin. The World Bank believes that industrial effluent pollution loading increased 6-10 times between 1963 and 1988 at a time when GDP increased threefold. In 1992 there were three sewage treatment works in Pakistan, two of which were understood to be operating intermittently.


Pakistan is moving towards market based approaches for abating water pollution and optimising water availability. Groundwater is free while water provision to industry and agriculture is subsidised.

Groundwater Total recharge (1998, km³) 55.00 Per capita (1998, m3) 372 Withdrawals (1980, km³) 45.00 For agriculture (1980) 89%

Privatising water services The move towards a legal system based upon Shariah Law poses certain problems with regards to commercialising water provision, but this needs to be set against the condition of Pakistan’s service infrastructure and the need to upgrade it. In addition, there have been recent calls by a number of Islamic scholars to recognise that the provision of water carries a monetary value. To date, the only formal privatisation proposals have been for Karachi’s water and sewerage services. Companies seen Seven firms pre-qualified in February 1998 to submit tenders for the proposed privatisation of the Karachi Water and Sewerage Company: Anglian Water International, Biwater International (Biwater), Hyder, Thames Water, International Water (United Utilities/Bechtel), Générale des Eaux (VE) and Suez. Biwater has been awarded one US$14 million construction contract to increase and improve potable water supplies to Karachi, including two water treatment works and a pumping station serving 30% of the city.

MAJOR CITIES Population 2000 2015 Status Karachi 10,032,000 16,197,000 Privatisation proposals stalled Lahore 5,452,000 8,721,000 Privatisation under consideration Faisalabad 2,142,000 3,526,000 N/A Peshawar 1,066,000 1,750,000 N/A Gujranwala 1,325,000 2,223,000 N/A Rawalpindi 1,521,000 2,500,000 N/A Multan 1,263,000 2,000,000 N/A Hyderabad 1,221,000 1,891,000 N/A Islamabad 1,068,000 1,854,000 N/A

REPUBLIC OF PANAMA PART 2: COUNTRY ANALYSIS


REPUBLIC OF PANAMA In 1999, Biwater was awarded a 30 year BOOT concession for bulk water provision to Laguna Alta for 350,000 people in Panama City. Aguas de Panama began operating the US$25 million Laguna Alta bulk drinking water plant in 2003. The 20million gallons per day facility will serve the residents of the La Chorrera, Arraijan and Capira areas, west of the Panama Canal. Laguna Alta will supply a minimum of 15million gallons per day for the first three years of the 30 year concession, and 20million gallons per day for the remaining 27 years. Biwater has built eight water treatment plants in Panama since 1982, but this is the first PSP contract in the country. Panama city’s water and sewerage services, along with other urban areas in the republic may be privatised in due course. The Inter-American Development Bank is providing a US$45 million loan for preparing the restructuring of Panama’s water and sewerage services. Instituto de Acueductos y Alcantarillados Nacionales (IDAAN) will come within private sector financing and management, with 51% of its stock to be held by a strategic private investor for water provision and sewerage. The total loan package is for US$65 million, with local funding of US$20 million. This concession will involve serving a population of over 2.7million inhabitants for the next 30 years. This will require an investment of US$50 million in the first five years and another US$90 million over the following 25 years. In all, around 21,000million pesetas will be invested during the total concession period. As a counterpart, the annual billing foreseen for the services rendered is approximately US$80 million (almost 12,000million pesetas at the current rate of exchange and more than 300,000million pesetas during the entire concession). Although ten companies and consortia expressed interest in the concession and six qualified for the formal bidding process in 2000, little subsequent progress has been made. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Laguna Alta 30 year water BOOT Biwater Panama currently plans to clean up the Panama Bay along with developing Panama City’s sewer network. The first phase will involve designing pumping stations, a WWTW and separate drainage networks for rainwater and sewage and will focus on the older parts of Panama City, serving an area of around 500,000 inhabitants. The estimated cost of the five year project is US$380 million. The entire project involves 164km of sewerage pipes, 24 sewage pumping stations, 24km of sewerage mains and three new WWTWs, each with a capacity of 1,600L per second. The government currently can afford to contribute US$18 million. Private sector company operations (Please see the relevant company entry for details)


Biwater Cascal (UK/Netherlands) 350,000 0 350,000

PARAGUAY PART 2: COUNTRY ANALYSIS


PARAGUAY Empresa de Servicios Sanitarios del Paraguay (Essap), owned by the Paraguayan Government, is the sole provider of piped water and sewerage services in all towns and cities with populations of 4,000 people or more. 42% of the population in these towns is connected to piped water, and 35% to the sewerage network. In Asuncion, the connection rates are 86% for water and 68% for sewerage. As a result, most of water provision is in fact carried out by private vendors. Since 1997, the government has been preparing for the privatisation of Essap. A national regulatory agency was set up to oversee Essap and to see how medium sized firms can support its activities through semi-independent sewerage projects. Essap is under consideration for PSP, a project supported by the World Bank since 1999. It would need to pay off the company’s US$500 million in debts and to mobilise finances for its belated service expansion. Paraguay's national environmental sanitation service, Senas a, is planning to spend US$26 million supplying 450 communities with drinking water, sources say. Work recently began and drinking water is expected to reach residents in July. The project is a part of Senasa's US$55.7million fourth rural water supply and sanitation project and its US$17.1 million small-communities drinking water supply and sanitation program. The World Bank approved a US$40 million loan in 1997 for the former and the Inter-American Development Bank approved a US$12 million loan in 2001 for the latter.

PERU PART 2: COUNTRY ANALYSIS


PERU While Lima remains in political limbo, a series of regional contract awards have been taking place. Peru is notable for being the first international market to award a concession contract to an Italian water company. It is unlikely to be the last, although the timing of any further privatisations remains uncertain.


Service provision In 1990, 49% of urban households were supplied with piped water (38% with inside taps) and 60% with sanitation, including 51% with flush lavatories. A survey of 12,314 households in urban areas found 75% had piped water and 58% had flush lavatories. The coastal cities of Peru (notably Lima) are characterised by increasingly severe water shortages, due to low rainfall in their regions. In cities, 70% of connections have 10 hours of daily supply, and 20% have more than 20 hours. The water pressure in 70% of the districts does not meet the recommended standards.


Regulatory background Peru has adopted legislation that supports both the private sector and decentralisation. Under this legal framework, the action of the state will be redirected from complete responsibility for water allocation and the construction and operation of water development projects to a role of mainly support and control, entrusting private users with the responsibility for managing water use. The Water Law of 1995 also allows for the marketing of water rights. The law has been influenced by the 1981 Chilean water law, which seeks to minimise the Government’s role in public interest elements and to rely on regulation and market forces. Peru’s Pacific Coast watersheds have been organised into five autonomous entities (Privatisation Plans table below).


Sedepal The privatisation of Sedepal, which provides water and sewerage services to 5million out of Lima’s 6.67million people was intended to be the follow-up to Aguas Argentarias. A 30 year concession contract was drawn up, with investment demands being US$600 million in the first five years and US$1 billion in the first ten. In preparation, 406,000 water meters were installed. Since it was first formally mooted between 1995 and 1996, it has been bitterly opposed by anti-privatisation elements. As a result, in 1997, the President of Peru decided to abandon the proposal in the shorter term. The Government has instead decided on a US$400 million investment programme, partly financed by the World Bank. During 2004, various moves towards a partial flotaton of Sedapal were made, along with attempts to outlaw private investment in the entity. It appears that the Government continues to aim for a partial privatisation in the medium term.


Services in the main cities

1991 Piped water Indoors Lima 94% 85% Arequipa 91% 67% Trujillo 78% 69%

PERU PART 2: COUNTRY ANALYSIS


In 1998, piped water in Lima cost US$0.15-0.30 per m3 against up to US$3.00 per m3 for water supplied by vendors. As a result, while piped water customers use on average six times as much water, their bills are lower. Sewerage in the main cities

1991 Sanitation Flush Lima 87% 83% Arequipa 70% 66% Trujillo 74% 56%

Groundwater Annual availability (1998) 303.0km³ Per capita 12,219m 3 Annual withdrawal (1973) 2.2 kkm³ Domestic 25% Industrial 15% Agriculture 60%

Privatisation plans Five privatisations have been in preparation since 2000:

Company Connections SEDAPAL 1,081,000 SEDAPAR 147,000 EPS GRAU 141,000 SEDALIB 102,000 EPSEL 96,000

These privatisation proposals to some extent represent a wish list, since the privatisation of Sedapal remains dependent on political circumstances. In May 2002, there were violent demonstrations in Arequipa when the Government went ahead with its auction of the power utilities Egasa and Egesur. MAJOR CITIES City 2000 2015 Status Lima 7,443,000 9,388,000 N/A After submitting the only bid, Brazilian construction firm Odebrecht has won the 20-year concession to develop the Olmos water supply and hydroelectric project in Lambayeque department. Odebrecht will construct the first stage of the dam as well as the tunnel which will transport water to the irrigated areas. The project will take water from the Huancabamba River to generate electricity and help irrigate 30,000ha in the Olmos area. The Peruvian government is providing roughly half of the money for the US$140 million project, and Odebrecht will supply the rest. Odebrecht’s concession only covers the first stage of the project, but once complete, the project aims to supply 2,050 million m3 pa of water, to be able to generate 600 megawatts of electricity and to irrigate more than 150,000ha for agricultural production. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Cono Norte 27 year water concession ACEA consortium A 30 year concession covering Piura and Tumbes in northern Peru is being developed. This will cover water and sewerage services for 190,000 connections, or some 1million people. The eventual coverage for these two concessions would be for 250,000 connections or 1.25million people. Investment requirements for Eps Grau (Piura) and Emfapa Tumbes (Tumbes) are estimated at US$221 million and US$50 million respectively. The intention is to announce the concession holders by the end of 2004.

Eps Grau Emfapa Tumbes Urban population 800,000 180,000 Water coverage 79% 68% Sewage coverage 64% 32% Water connections 150,000 40,000 Metered connections 17% 6%



ACEA ACEA (Italy) 800,000 0 800,000

PHILIPPINES PART 2: COUNTRY ANALYSIS


PHILIPPINES The privatisation of Manila’s water and sewerage services has continued to attract attention, especially due to the differing fortunes of the two concession companies. These have demonstrated the sheer impact foreign exchange exposure can have, along with the need to secure a stable revenue base when upgrading services.


Water services In 1980, 45% of the population had access to the water supply. In 1987, 63% had access to safe water, with 31% via piped water; 86% in Metro Manila, 55% in other urban areas and 62% in rural areas. The term ‘safe’ with regards to drinking water is open to debate. Just over 36% of the country's river systems were classified as sources of public water supply in 2003 and up to 58% of groundwater sampled is bacteriologically contaminated and needs treatment. Approximately 31% of illnesses monitored for a five-year period were also caused by water-borne sources. 1,000 out of each 100,000 people die each year because of diarrhoea, one of the highest known rates in the world.

Access to services 1980 1987 1993 Access to safe water 45% 63% 81% Access to sanitation 56% 69% 72%

Sewerage services The only major sewers cover 8% of the metro Manila area, (all discharged untreated). Small sewerage systems exist in Davao (central area population 850,000), Zamboanga (442,000), Cebu (610,000), Cauayan (340,000) and Isabela (district population 1.08million). Sanitation coverage is currently 65% rural, 85% urban. In 1980, 56% of the population had access to sewerage or septic tanks. By 1987, 69% had safe sanitation, 15% unsafe sanitation and 16% none. 52% of BOD discharged was via domestic sewage, with 48% from industrial sources.

1994 2000 Diarrhoea morbidity 1.0% 0.4% % access to sanitation 78.2% 93.0% % access to safe water 87.0% 100.0%

Sewage treatment coverage

City People served % coverage Metro Manila 1,010,000 8% Bagulo City 5,300 2% Zamboanga City 3,700 1% Vigan City 1,360 3% Bacolod City 2,020 1% Cauayan, Isabela 4,000 2% Davao City 1,161 1%

During the late 1990s and early 2000s, sanitation accounted for 3% of water related spending. Spending of P158 billion will be required if 50% of the urban population is to have adequate sanitation services by 2015.


Privatisation and priorities The National Water Crisis Act (Republic Act No. 8041) was passed in June 1995. This recognised the Government’s past shortcomings in water provision and is aimed at improving both the extent and quality of water provision. Sewerage remains a relatively low priority outside Manila, apart from industrial discharges that directly impinge upon drinking water quality. The Act superseded previous legislation and the Philippine Water Code (1979), whereby private customers were given the highest priority.



Privatisation has been spurred by the passing of the National Water Crisis Act and the realisation that previous plans have not begun to address public health concerns. The Philippines want ideas for technology transfer as well as straightforward projects, seeing themselves as a potential regional centre for the environmental services sector. The Philippines are keen to privatise bulk water supply and sewerage, along with solid and hazardous waste management. The Government was less keen on privatising the actual water distribution system except in areas of greater shortages. A broadly based privatisation of urban sewerage and bulk water provision is now under way. This will run from 2002-05 and is fully open to foreigners, as long as they are able to find ways to pay for the work needed.

Urban Services Safe drinking water 91% L per capita per day 135 Access to sewerage 88% % Sewage treated 1%

Environmental management and laws The National Water Resources Council (NWRC) is a semi-autonomous entity under the Department of Public Works and Highways (DPWH). The DPWH is responsible for the major water and sewerage projects and also for rural services. The Metropolitan Water and Sewerage System (MWSS), serves Manila. Major cities have separate service entities, while small towns are managed via a collective organisation. The Department of Environment and Natural Resources (DENR) is responsible for implementing legislation and carries out environmental management work along with the Environmental Management Bureau (EMB). The core items of legislation are: Water Usage and Classification (1978) with revised Water Quality Criteria (issued in 1990 DENR Administrative Order No. 34). Effluent Regulations 1982 (revised 1990 DENR Administrative Order No. 35).

Freshwater Total (1998, km³) 323.0 Per capita (1998, m3) 4,476 Withdrawals (1990, km³ 55.4 For domestic use (1987) 8% For industry (1987) 4% For agriculture (1987) 86%

Groundwater Total recharge (1998, km³) 180.0 Per capita (1998, m3) 2,494 Withdrawals (1980, km³) 3.9 For domestic use (1980) 0% For industry (1980) 50% For agriculture (1980) 50%

Water companies noted Cascal, United Utilities, VE and Suez are all active in the Philippines. Benpres Holdings of the Philippines, George Kent Holdings (Malaysia) and Brown & Root (USA) have all been seeking contracts, the former building on its role in the MWSS privatisation. In August 1999, Benpres was awarded the first solicited bid outside Manila. This was a P70 million 15 year DBO for the Laguna water system serving the town of Magdalena.

MAJOR CITIES Population 2000 2015 Status Metro Manila 9,950,000 12,579,000 MWSS privatised Davao 1,146,000 1,365,000 Proposals under development

City privatisation study: Manila’s MWSS The Metropolitan Water and Sewerage System (MSWW), was founded in 1972. Metro Manila is a conurbation in the true sense. The area covers 11.5million people in four cities and 37 municipalities, with the population growing at 3% each year. The population of Manila is expected to double by 2025. 40% of those within the area currently live below the World Bank’s definition of the poverty line. Water coverage was 53% in the 1970s, 70% in the 1980s and 80% 1993/94. Water losses of 65% in 1986 were cut to 58% in 1991 and 56% in 1992. Some of this comes via water theft and illegal connections. The MWSS sewage system was built from 1904-11 and designed to cover 500,000 people. 11% of the population were connected to sewerage services in 1990 and 16% (828,000 in central Manila and a further 56,000 in Makat) in 1993. Sewage goes to a long sea outfall. The privatisation of MWSS was arranged by the IFC to mobilise US$6 billion of investment for upgrading and expanding the water distribution system and in the longer term, to install a modern sewerage and sewage treatment infrastructure. The MWSS has been split into two zones, each taking over the existing assets, with each responsible for improving these and adding new assets. The contracts are to be run on a 25 year BOT basis.



MWSS remains as a regulatory overseer for the concession holders for the life of the contracts. The IFC set the following performance targets:

Water distribution 1998 2001 2006 Coverage 67% 85% 100% Water availability 1998 2006 2006 (Hours/day) 16 24 24 Sewerage 1998 2023 2023 Coverage 3% 83% 83%

The contract awards to Suez and United Utilities represent the largest water and sewerage privatisation in Asia to date. Each adopted differing pricing patterns:

Operator Peso/m3 US$/m3 MWSS (in 1997) 8.78 0.33 UU/Ayala (eastern) 2.32 0.09 Suez/Benpres (western) 4.97 0.19

The subsequent performance of these two contracts is examined in detail in the company entries. It is fair to observe that the status of the Suez / Benpres contract remains a live issue and is moving towards a sustainable modus operandum. Then chief difference between the two concessions had been that the UU / Ayala concession enjoys a customer base underpinned by industrial and commercial customers who were in a position to ride out the challenges posed by the currency crisis of 1997-98. In both cases, it is evident that significant work has been made in terms of improving network efficiency and service coverage.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Clark EZ Development of industrial zone services CGE Utilities Forto Bonifacio Development of industrial zone services CGE Utilities Kailangan 15 year water services management Benguet Magdalena 15 year DBO for water services Bayan Water Manila (east) Privatisation of MWSS Manila Water Company Manila (west) Privatisation of MWSS Maynilad Water Services Subic Bay Development of services for new town Subic Water

Project proposals Ayala Corporation has announced that it has submitted a BOT proposal for a P1.9 billion (US$34.23 million) water supply project in Carmen, Cebu, in partnership with Stateland Inc. The project would supply an average of 50,000 cu m of water daily to the Metro Cebu Water District from Luyang River in Carmen. Cebu is the Philippines’ second largest city but suffers from a perennial water shortage. Metro Cebu Water District currently supplies 275,000m 3 per day and the will increase water supply by 26% and address the unserved demand for water connections. The government is preparing to issue tenders for the P3.7 billion (US$67 million) Laguna Lake bulk water supply BOT project intended to supplement Metro Manila’s potable water supply. The scheme would supply at least 0.4 million m 3 of potable water 24 hours a day to Metro Manila and adjoining areas.


Water Sewerage Total Subic Water Biwater (UK) 370,000 370,000 370,000 CGE Utilities VE (France) 0 0 0 Bayan Water Services Benpres Holdings 18,000 0 18,000 Benguet Benguet (Philippines) 27,000 0 27,000 Manila Water Co UU (UK) / Ayala (Philippines) 3,400,000 500,000 3,400,000 Maynilad Water Suez (France) / Benpres 4,300,000 700,000 4,300,000

Source: Philippines Environment Monitor 2003. The World Bank

POLAND PART 2: COUNTRY ANALYSIS


POLAND Through a legacy of mis -management during the Soviet era, Poland probably faces the most daunting environmental challenges of those countries currently seeking accession to the EU. The country is hoping to postpone various compliance targets, but derogations awarded offer limited respite. Since 2003, a number of PSP awards have been made, but the climate remains a febrile one.


Laws and spending Polish water law has been revised to bring water and sewerage laws in line with EU standards by 2002. These call for suitable levels of service, provision of increasing treatment standards with time, financial incentives for the private sector and protection of consumer interests. Tariffs are to be established by water companies and approved by the local community with yearly revisions and the prospect of differential charging. The official aim is to reach EU standards by 2010, as accepted by the EU. There are 700 water utilities, 300 of which serve urban areas. In 2000, the average water price was US$0.84 per m3. Environmental spending was US$2.1 billion in 1998, up from US$0.8 billion in 1990, with 40% of this going to water (equivalent to 0.6% of GNP). In 2000, estimates by the Government point to US$700 million pa being spent on water related work in Poland. Some 5% of this is currently coming from foreign investment. Water abstraction and discharge fees covered approximately 18% of costs in 1992 and 15% in 1996. The compliance costs for water and wastewater upgrading and extending for EU accession has been variously estimated as between €20 and €40 billion in 1998, with US$2.6 billion required for sewage treatment works and US$4 billion for sewerage. Poland is seeking transition derogations up to 2016 because of the estimated cost of EU compliance. The UWWTD is the main concern, with only 6% of the population in rural areas having access to sewage treatment. Poland claims that it is currently spending €3 billion pa on environmental capital expenditure against an accession requirement of €40 billion. Water standards will cost a total of €18 billion, with a further €3 billion for waste management. The EU believes that these figures have been exaggerated. In 2003 the Government cut the levies that water suppliers pay for using water resources. From April 2003, the levy per m³ of surface water taken to produce drinking water, or water for domestic purposes, will be PZN 0.03 (US$0.7), down from PZN 0.042. This is intended to water suppliers to reduce their prices.


Pollution and problems Polish data is on the harsh side because the worst performing parameters are used as definitive. Surveys using biological criteria point to up to 88% of rivers being of class 4 quality in 1990 and 96% in 1995. Class 4 rivers are those which are biologically dead and whose water cannot be used for agriculture or industry. River water quality

Class 1985 1990 1995 2000 1 4.8% 6.0% 2.9% 5% 2 30.3% 27.9% 20.3% 35% 3 27.8% 30.3% 33.8% 40% 4 37.1% 35.8% 43.0% 20%

Urban Services % Water 94% L per capita per day 124 % Sewerage 83% % Sewage treated 79%



Development of urban water and sewerage infrastructure

Treatment level 1990 1995 1998 1999 Tertiary 0% 4% 18% 24% Secondary 36% 50% 48% 47% Primary 24% 14% 13% 8% None 40% 32% 21% 17%

Effluent treatment and generation

Billion m3 pa 1990 1995 1998 Effluent generated 2.31 1.85 1.65 Effluent treated 1.39 1.25 1.31

In 1992, 48% of the largest industrial sites had no effluent treatment facilities. 17% of all industrial discharges were untreated, with 66% of industrial effluents subject to primary treatment only, and 17% to secondary treatment. 5% of factories had plants with an inadequate treatment capacity. 42% of the population connected to the sewerage network had no treatment in 1980, compared with 29% in 1992. The sewerage network is seen as being in poor condition. By 1996, 43% of the population had access to a sewage treatment works, including 66% in urban areas (up from 57% in 1992). In 1992, 590 of Poland’s 860 towns had sewage treatment works, 465 to secondary standard and 125 to primary. By 1995, 643 of these towns had sewage treatment works, 105 primary and 538 secondary. An urban/rural divide In 1997, 91.2% of the Polish population was supplied with water from municipal systems and 87.9% by sewerage systems. These services cover 98% and 97% of the urban population respectively compared with 80% and 74 % respectively for the rural population. Between 1990 and 1996, over 900,000 rural households were connected to water supply systems. The Government aims to have 100% water supply and sewerage coverage by 2010. Sewage treatment covers 3.1% of rural households. In the last few years, water pollution, resulting from sewage from rural areas is becoming an increasing problem. 25% of effluent generation is from rural areas and its lack of treatment means that it has a disproportionate impact.

Freshwater Total (1998, km³) 49.4 Per capita (1998, m3) 1,278 Withdrawals (1992, km³) 12.1 For domestic use (1987) 13% For industry (1987) 76% For agriculture (1987) 11%

Privatisation prospects The pace of privatisation is stepping up after a slow start. The main development to date has been the planned flotation of Warsaw’s water and sewerage services since 2000. Urban water and sewerage services such as the second Warsaw STW have been reconstructed as limited companies, but remain directly under the control of the municipalities and the Government’s Environmental Council. Effectively all aspects of the operation of water and sewerage services are in the hands of the local authorities. It is up to each authority to decide if privatisation will take place. The major French water companies have been helping to frame the privatisation process. While the Government remains committed to privatising water and sewerage services, there is some reluctance at municipal level. SAUR’s experience in Gdansk may alleviate this. The city of Stettin was expected to start a prequalification process for the award of a water and sewerage concession by the end of 2000. The privatisation of Poznan’s PwiK was abandoned, when the municipality decided that it could develop its services for 650,000 people unilaterally, by using the EU’s €75 million Instrument for Structural Policies Pre-Accession (IPSA) grant, even though it was linked to a concession. Water companies noted SAUR is involved in the management of Gdansk’s water and sewerage facilities. SAUR Neptun Gdansk has increased the proportion of water that meets the Government’s water quality criteria from 8% in 1992 to 25% in 1997. In November 1999 SAUR gained a €40 million 25 year water and wastewater management and renewal contract for Ruda Slaska, which has a population of 170,000. In Krakow, CH2M Hill (USA) has developed a plan for water provision for the city which it hopes to turn into a BOOT contract. RWE Aqua, Gelsenwasser, VE, UU, SAUR and Suez are bidding for the Poznan concession. In 2003, Atkins Water was commissioned by the Krakow Municipal Water and Sewerage Company (MPWiK) to undertake a range of efficiency studies with the potential of privatisation to mind.



Groundwater resources Total recharge (1998, km³) 36.0 Per capita (1998, m3) 931 Withdrawals (1990, km³) 2.0 For domestic use (1990) 70% For industry (1990) 30% For agriculture (1990) 0%

MAJOR CITIES Population 2000 2015 Status Katowice 3,494,000 3,547,000 N/A Warsaw 2,274,000 2,325,000 Privatisation plans being drawn up Lodz 1,053,000 1,061,000 N/A Gdansk 893,000 913,000 Management contract since 1995 Krakow 859,000 892,000 BOT plans under consideration

City Study: Warsaw Central Warsaw has 1.64million inhabitants, 98% receiving potable water and 95% connected to the sewerage network. One sewage treatment work treats the effluents of 500,000-600,000 people. The rest of the effluent is directly discharged into the Vistula river. Approximately 25% of the population is subject to water shortages, partly due to a 113% increase in distribution losses between 1975 and 1991, at a time when consumption rose by 39% (reasons include, customer affluence, e.g. washing machines and power showers). The EBRD is encouraging Warsaw to float Miejskie Przedsiebiorstwo Wodociagow I Kananlizacji (MPWiK) in the shorter term, ideally through an IPO. The city’s first STW has a treatment capacity of 240,000m 3 per day. Degrémont was involved in the design and construction of the second Warsaw STW and the upgrading of the original STW in a project which is being partially funded by the EBRD. The second STW has a capacity of 112,000m 3 per day, serving 300,000 people at a cost of US$128.5 million. VE's OTV is involved in the design of a third STW for northern Warsaw, for treating a population equivalent to 850,000 with a treatment capacity of 260,000m 3 per day. This project is at the study phase, and more direct methods of private sector finance and involvement are under consideration. The construction of this US$150 million facility is expected to be integrated into the Warsaw Water flotation procedure. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Silesia (two towns) 25 year water and sewerage BOT VE Dabrowa 25 year water and sewerage BOT RWE Biesko Biala Strategic partnership with municipality UUI Miskloc 20 year water and sewerage concession Pwik w Glogowie Private sector company operations (Please see the relevant company entry for details)


RWE RWE (Germany) 135,000 135,000 135,000 VE Veolia Environnement (France) 70,000 70,000 70,000 UUI United Utilities (UK) 300,000 300,000 300,000 Glogowie Gelsenwasser (Germany) 150,000 150,000 150,000 Source: Warner, J. (1999). Poland: The Environment in Transition. The Geographical Journal, 165, 209-221.

PORTUGAL PART 2: COUNTRY ANALYSIS


PORTUGAL The future of the state held IPE Aguas de Portugal is currently under discussion., It is understood that despite occupying most of the market, PSP has already taken place in more cases than has been appreciated, even after the sale of Agbar’s Lusagua. The next stage is expected to take place by 2006, in anticipation of the phasing out EU funding.


Regulation Portugal is developing a strategy for the integrated management of coastal areas and water resources. This strategy includes an inventory of water use and sources of water pollution. A wastewater discharge licensing system has been established, along with the Water Resources Planning Process covering the River Basin Plans and the National Water Resources Plan. Water quality and requirements Portugal remains an essentially rural economy and this is reflected by the country’s water and sewerage infrastructure.

River water quality (1991) Ia/Ib/II Very Good - Fair 75% III/IV Poor - Bad 25%

There are groundwater problems in the Ave Basin and Aveiro/Estarreja (industrial wastes), North of Lisbon (agricultural run-offs) and Algarve (salt water intrusion). 3.8million people live in areas with water shortfalls, mainly in the Algarve, Lisbon, and Madeira. Access to piped water

Region 1990 1995 1997 1999 North 65% 70% 71% 78% Centre 68% 84% 89% 95% Lisbon & Vale do Tejo 92% 97% 98% 99% Alentejo 83% 89% 92% 94% Algarve 82% 82% 88% 91% Total 77% 84% 86% 90%

Access to sewerage

Region 1990 1995 1997 1999 North 36% 44% 51% 59% Centre 39% 52% 54% 71% Lisbon & Vale do Tejo 79% 86% 86% 89% Alentejo 69% 83% 84% 85% Algarve 76% 68% 81% 84% Total 55% 63% 68% 75%

The aim is to have 95% access to piped water by 2006, along with 90% sewerage and wastewater treatment.

Sewerage and sewage treatment Year 1996 Tertiary 0% Secondary 25% Primary 13% Sewerage only 17% Not connected 45%

There are 1,251 STWs in Portugal of which 278 provide primary treatment and 955 secondary treatment. However 41% of these plants are not working properly. The National Plan for Wastewater Treatment (Plano Nacional de Tratamento de Aguas Residuais) was drawn up with the broad aim of ensuring EU compliance for sewage treatment. Portugal rebuilt and retrofitted 35 STWs during 1998. The plan aims to increase wastewater treatment to 95% by 2005.




Spending needs Portugal has enjoyed €1.45 billion in Cohesion funding for environmental projects between 1993 and 2002, albeit with a dramatic tailing off in 2002. Compliance work from 2000 to 2006 will cost Esc800 billion (€4 billion) and even with a maintained level of Cohesion funding, private sector capital of Esc300 billion is needed. Overall, Esc270 billion is needed for expanding piped water provision to at least 95% of the population, while Esc530 billion is required for sewerage and sewage treatment.

Urban services % Water 97% % Sewerage 95% % Sewage treated 85%

Private sector participation legalised Private sector involvement was specifically outlawed in 1977. The 1993 water policy reforms created conditions for the quasi-privatisation of the water market. Municipalities are allowed to privatise their services at their own pace, while retaining ownership of the assets. Privatisation has been erratic to date because of the public and political expectations of lower prices. Political pressure for some effective form of privatisation will be maintained because of Portugal’s relative dependence on EU funding for water and sewerage compliance work. Until 1998, public control of water operations was retained via a 49% private sector holding cap.


Privatisation prospects 93% of the population is covered by two groupings accounting for 268 municipalities, IPE Aguas de Portugal and EPAL. EPAL (Empressa Portugesa das Aguas Livres) serves water to 0.31million people in Lisbon along with a number of small contracts in other areas. EPAL has been in existence for over 100 years. The Government has invited foreign companies to consider taking a stake in EPAL to finance part of its compliance programme. Aguas de Portugal expects to have at least some of its local companies partly privatised through share sales from 2004. ADP serves 70% of the country’s population through 14 water supply and 14 wastewater treatment companies and has been valued at €2-3 billion. The government is seeking to sell the individual companies on a concessional basis, preferably to Portuguese entities.

Groundwater Total recharge (1998, km³) 5.1 Per capita (1998,m 3) 521 Withdrawals (1990, km³) 3.0 For domestic use (1987) 39% For industry (1987) 23% For agriculture (1987) 39%

Companies noted Agbar’s Lusagua JV was the dominant private player company in Portugal, serving 1.06million people through six contracts: four for direct service and two for bulk water provision. Lusagua was sold to Aguas de Portugal for €23.5 million in 2001. Lusagua had a 2000 turnover of €10 million. AdeP has also acquired the Dos Lagos concession in Brazil from ProLagos. VE and Severn Trent have gained a number of contracts.

MAJOR CITIES Population 2000 2015 Status Lisbon 3,861,000 4,544,000 Piecemeal privatisation underway Porto 1,940,000 2,400,000 N/A



Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Fafe 25 year water provision concession IIG de Aguas Frielas 25 year water and sewerage concession Aqualias Mafra 25 year sewerage concession Aqualias Matoshinbos 25 year water concession FCC Ourem 25 year sewerage concession Aqualias Paredes 35 year sewerage concession Aqualias Santo Tirsa 25 year water provision concession IIG de Aguas Valongo 30 year sewerage concession Aqualias

In 2003, approximately 1.2million people were served by various forms of PPP contract. Approximately 0.1million were served by small contractors with local companies.


Water Sewerage Total Aqualias VE (France) 184,000 250,000 255,000 FCC FCC (Spain) 244,000 0 244,000 IIG de Aguas Severn Trent (UK) 154,000 0 154,000

QATAR PART 2: COUNTRY ANALYSIS


QATAR All supplies from groundwater or desalination Effectively Qatar has no surface water. Agriculture is therefore almost entirely dependent on irrigation from pumped groundwater. It is estimated that Qatar aquifers will be depleted in 20 to 30 years at recent rates of groundwater withdrawal. Groundwater is becoming 5% saltier every year because of too much water being pumped from the ground by farmers with saltwater ingress into underground aquifers as a consequence. At the same time, these resources are being progressively contaminated by nitrate run-offs from agriculture. Privatisation proposals slowly evolving The World Bank is developing proposals for the privatisation of a number of state owned industries and utilities. The Qatar Electricity and Water Company (QEWC) is a JV company, with private sector involvement in the power generation plant, while the Ministry of Electricity and Water owns the desalination plant. QEWC is 43% owned by the Government and 57% by local investors. The Government’s current pricing policy of supplying potable water free of charge to the prime residence of all Qatari nationals may need to be reconsidered depending on the nature of private sector involvement required. In 2000, QEWC was granted the power to charge for services and to operate on a commercial basis. In 2003, QEWC invited bids for a privatisation feasibility study, after the previous set of proposals outlined in 1999 fell through. Since 1954, the use of desalination has increased so that all demands for domestic and industrial water supply for Doha and its surroundings are met by desalinated water. The annual production capacity for desalinated water is presently 126million m3 pa. Desalination plants account for 96% of municipal potable water production. The total available potable water storage in the country, in buffer reservoirs, ground tanks, elevated tanks, and water towers, totals approximately 1.1million m 3. This represents approximately three days' supply based on an average national consumption rate. Groundwater and water imports The total gross extraction of groundwater for irrigation purposes increased from about 44million m3 pa in 1972 to about 220million m3 pa in 1995. The abstraction for public supply increased from 4million m3 pa to 6million m3 pa in 1977 and then fell back to 2.5million m3 pa in 1994. Qatar is seeking to restrict the use of groundwater resources to agriculture, while constructing more desalination plants for potable and industrial water supply. In Qatar the renewable water resources are now totally depleted. The accumulated groundwater deficit during the period 1972-1995 was 994million m3, more than one third of the 1977 estimate of total groundwater reserves in the country of 2,500million m3. As a result, groundwater levels are falling by 0.5-1.1m per year and the quality of water is being compromised by sea water ingress and the intrusion of saline water from deeper aquifers. The estimated safe yield of the aquifer, based on the calculated average natural recharge over the last 20 years is some 35million m 3 pa. In order for the Government to maintain irrigated agriculture, and in the absence of any other source of water supply, Qatar is looking to import water from Iran. This would be used to increase the remaining groundwater reserves through artificial recharge to combat and minimise the environmental impact on the deteriorating water quality caused by salt water intrusion and soil degradation. Imported water from Iran is being negotiated and the Government has commissioned a study to test the feasibility of using this water for direct irrigation purposes. It is expected that 5m3 per second (160million m 3 pa) of water would be delivered from Iran’s Karun River.

ROMANIA PART 2: COUNTRY ANALYSIS


ROMANIA The EBRD and IFC have overseen the privatisation of Bucharest’s water services and are now making headway into secondary cities. The country’s real challenge lies in the rural areas where out of 13,097 villages, only 2,541 have piped water and 358 have sewerage.


Water pricing and plans Current water pricing covers all provision costs. The formulae used are under review for the more efficient allocation of water. In order to take into account the special needs of the poor the taxes and prices for household and agricultural use of water is one third less than those for use by industry. The estimated cost for achieving universal coverage of water and sanitation in Romania is about US$500 million in the short term (3-5 years) and about US$700 million in the medium term (5-10 years). The Romanian Water Association (ARA) stated in 2003 that it believes that €18.64 billion needs to be invested by 2023 to upgrade Romania’s water and wastewater infrastructure to meet EU requirements. This includes €14.4 billion for urban areas, an average of €1,220 million a year. After taking into account possible EU grants and government financing, there wil l still be a shortfall of around €1,100 million a year which would need to be made up by the private sector.


Sewerage and sewage treatment The Siret River basin has a total population (including some people in the Ukraine) of four million. The city of Galati (330,000 people) has no sewage treatment. 42% of the area’s population lives in urban areas . 77% of these are connected to sewerage networks, 50% of which gets its sewage treated. This implies that 17% of people in the area have access to STWs. Including industrial effluents, the EBRD has identified a basic level of €250 million needed for investments in municipal and industrial effluent treatment.

Sewage treatment (1992) Tertiary treatment 0% Secondary treatment 29% Primary treatment 8% None 63%

By 1997, 50% of urban sewerage was treated. Recycling of wastewater is undertaken in only a few local industrial installations. Some 50% of industrial discharges are untreated. The proportion of good quality rivers improved from 35% in 1985 to approximately 54% in 1994. There still remained some 12-13% of the rivers’ length where the degradation was such that it rendered them almost lifeless.

Urban Services % Water 81% Domestic consumption 254 L/day % Sewerage 69% % Sewage treated 35%

Water provision Approximately 50% of water is treated for drinking purposes; this percentage is regarded as too low. There are 2,770 water treatment works in Romania of which only 40% operate. On average these plants treat 40m3 per second. The Government seeks to remove current water provisions by 2003-05 through extending the distribution of potable water by 5% and increasing the efficiency of existing treatment plans by 20-30%. There is no metering for domestic customers. Distribution losses are 24% overall and 25% in cities.

ROMANIA PART 2: COUNTRY ANALYSIS


Freshwater Total (1998, km3) 37.0 Per capita (1998, m3) 1,639 Withdrawals (1994, km³) 26.0 For domestic use (1987) 8% For industry (1987) 33% For agriculture (1987) 59%

Privatisation and the EBRD The EBRD has developed a Municipal Utilities Development Programme (MUDP), starting with a US$28 million loan in December 1994, covering water and effluent treatment in Brasov, Craiova, Iasi, Timiosara and Tirgu Mures, cities with a population range of 164,000-360,000. The MUDP is designed to encourage private sector involvement in the water companies in these cities. Prior to MUDP, all finance has been through Central Government grant transfers. In 2001, Timisoara’s Aquatim funded €438 million in wastwater upgrades, through a €34 million ISPA loan allied with local loans.

Groundwater Resources Total recharge (1998, km³) 8.3 Per capita (1998, m3) 368 Withdrawals (1975, km³) 1.0 For domestic use (1975) 61% For industry (1975) 38% For agriculture (1975) 1%

MAJOR CITIES Population 2000 2015 Status Bucharest 2,001,000 2,001,000 Privatised

Privatisation of Bucharest’s services Bucharest’s water company, the Regia Generale de Apa Bucuresti (RGAB) was privatised under the IFC's auspices. Water supply for the city is through taps (92%) and standpipes (8%), averaging 800 L per capita per day at US$0.17 per m3. RGAB supplies sewerage for 85% of the city. Capital spending of US$1,000 million is needed for water and sewerage over the life of the concession. Six bidders pre-qualified, three submitting compliant bids (UU/Bechtel, Suez and VE) with Azurix presenting a letter. VE’s Apa Nova Bucaresti SA won with a tariff of US$0.11 per m3, with a strict set of performance criteria and future tariff increase limits. VE have acquired 70% of RGAB’s equity for €35 million in 2001. Suez has a 25 year BOT for bulk water provision to 920,000 people in the city via the construction of a F350 million water treatment works. Suez holds 51% of the consortium and its Degrémont subsidiary will hold the remaining 49% of the equity. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Bucharest 25 year water concession Veolia Ploiesti 15 year water concession Apa Nova SRL Zetea Water DBOT Amiantit Constanta Regia Automoma Judeteana De Apa Constanta (RAJAC), which serves the county of Constanta (600,000 people, plus up to 400,000 tourists) is seeking to award a 20 year concession. RAJAC has a turnover of €23 million and this project is linked to EBRD aid. Six international companies have pre-qualified for the bid, but little progress has been identified during 2004. Private sector company operations (Please see the relevant company entry for details)


Apa Nova SRL VE (France) 250,000 0 250,000 VE VE (France) 2,000,000 0 2,000,000 Amiantit Amiantit (Saudi Arabia) 200,000 0 200,000

THE RUSSIAN FEDERATION PART 2: COUNTRY ANALYSIS


THE RUSSIAN FEDERATION Broadly speaking, the management and condition of the Russian Federation’s water resources is in a poor condition. Overall improvements have been attained by Russia divesting itself of its central Asian republics and thus no longer including the Aral Sea within its boundaries. Developments and contract awards are gathering in Moscow and St Petersburg, but with the recent entrance of a number of vibrant local players it is also evident that this is going to be a most intriguing market.


Legislation and its enforcement The fundamental law on the Protection of the Natural Environment was enacted in 1991. The law was intended as setting a foundation for more specialised environmental acts, but the post 1993 constitution has limited its worth. Preparation of the Law on the Protection of the Environment in the Russian Federation is currently being considered, along with the concept of the transition of Russia to the model of sustainable development. The complexity of the system of environmental responsibilities of the various state agencies is a further problem. The Plan of Action of the Government of the Russian Federation for Environmental Protection and Resource Management for 1996-1997 has been approved, and interested ministries and agencies and local government bodies are taking part in its implementation.


Water usage The total water intake from renewable water resources throughout the Russian Federation was 92.3km³ in 1996 as compared to 96.2km³ in 1995, a decrease of 3.92km³. On the whole, water consumption for industrial needs totalled 53.1% per cent, for household and drinking purposes 19.1%, irrigation 14.3%, agricultural water supply 4.3%, and other uses, 9%. Owing to the poor quality of water from these sources (and a number of other reasons), the country's existing system of drinking water supply is in a critical situation. The number of water bodies with severe violations of water quality standards is gradually increasing. About 10% of groundwater intakes have reported exhaustion of water supplies. More than 40% of piped water from surface sources is not treated, despite significant resource contamination, affecting 68% of urban and 10% of rural consumers. 25% of water withdrawal facilities are not surrounded by protection zones, while the other facilities are typically non-compliant. Overall, 20% of the drinking water samples taken in 1990-94 did not meet chemical safety criteria, and 11-13% of the samples showed bacterial contamination. The level of pollution of the coastal seas is constantly high. In 2001, 40% of drinking water was of potable quality and 30% of domestic effluents were treated.


Sewerage and sewage treatment Effluent treatment rose from 2.3km³ in 1995 to 2.6km³ in 1996, the first increase in recent years. Total effluent discharges were 24.5km³ and thus 11% of effluents are treated.



Freshwater Annual availability (1998) 4,312.7km³ Per capita 29,115m 3 Annual withdrawal (1994) 77.1km³ Domestic 19% Industrial 62% Agriculture 20%

Financing In 1995, revenues received from the abstraction of water were US$7.8 million per km³ of freshwater collected, compared with expenditure on the maintenance, repair and use of networks of US$19.5 million per km³. This is equivalent to a cost recovery of 40%, and points to total spending of US$1.88 billion in 1995. Financing of measures concerning the use and protection of fresh water sources is provided by: the federal budget (18%), the budgets of member states of the Federation (16%), local budgets (18%), resources of enterprises (53%), environmental funds and other sources (5%).

Groundwater Annual availability (1998) 788.0km³ Per capita 5,320m³

Privatisation prospects Three contracts have been awarded to WTE, part of Austria’s EVN, one involving Suez. VE is involved in the construction of a sludge treatment plant for St Petersburg worth €70 million. At the same time, a number of Russian water utilities have been emerging. The following companies were noted by Global Water Intelligence (August 2004, P15): JSC Russian Utility Systems (RKS) was formally registered in May 2003 and has some 50 short-term contracts for communal services with municipalities and regions. JSC Russian Communal Investments (RKI), a subsidiary of Bazovyi Element, operating in Nizhnii, Novgorod Oblast and some cities of Irkutsk Oblast, Krasnoyarsk Krai and Buriatia. Alfa Eco (Alpha) is present in Orenburg, Krasnoyarsk and Voronezh. Novogor (Russia New Municipal Systems, part of Interros) took over the water utility of Perm.

MAJOR CITIES City 2000 2015 Status Moscow 8,367,000 8,141,000 Two wastewater contracts St Petersburg 4,635,000 4,488,000 Private sector water consulting support Omsk 1,174,000 1,187,000 N/A Novosibirsk 1,321,000 1,276,000 N/A Ekateringburg 1,218,000 1,162,000 N/A Samara 1,132,000 1,083,000 N/A Perm 991,000 952,000 Novogor Chelyabinsk 1,045,000 1,088,000 N/A Ufa 1,102,000 1,110,000 N/A Kazan 1,137,000 1,140,000 N/A Rostov-On-Don 1,012,000 1,009,000 N/A Volgograd 1,000,000 1,00,000 N/A Krasnoyarsk 840,000 811,000 RKI Saratov 881,000 871,000 N/A Tolyatti 771,000 899,000 N/A Ulyanovsk 864,000 1,144,000 N/A Voronezh 918,000 934,000 Alfa Eco

City Study: Moscow Water and sewerage services are provided by Mosvodokanal. Water usage by domestic customers rose from 3.68 million m3 pa in 1992 to 3.88 million m3 in 1995, while usage by industry fell from 1.05 million m3 pa to 0.61 million m3 pa over the same period of time. Likewise, water discharge by domestic customers rose from 2.29 million m3 pa to 2.38 million m3 pa, while falling from 0.70 million m3 pa to 0.43 million m3 pa for industrial and power customers. It appears likely that the monitoring of the discharge of industrial effluents has eased during this period. The quality of drinking water has been affected by drives to develop land surrounding water abstraction areas to the point where these sources are being materially contaminated. In consequence, while 1.2% of drinking water samples failed bacterial contamination tests in 1991, this rose to 3.4% by 1995. The failure rate on chemical criteria for recreational water bodies rose from 48% in 1991 to 72% in 1995 and from 53% to 65% for bacterial contamination over the same period. Meanwhile, a collapse in living standards for the majority of the population has taken place to the point where environmental concerns are overshadowed by apparently more immediate concerns. In 2002, Mosvodokanal claimed that it was owed R30 million (€965,000) in unpaid bills by regional administrations and municipal institutions. At the beginning of 2002 Mosvodokanal cut the supply of



drinking water to several towns in the Moscow region. Mosvodokanal in turn owes R70 million (€2.25 million) to energy supplier Mosenergo. In the meantime Mosvodokanal has filed a counterclaim against Mosenergo for R16.9 million (€540,000). Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Moscow 11 year, wastewater build, O&M WTE Moscow 12.5 year, wastewater build, O&M WTE Moscow 13 year, water BOOT Suez/WTE Private sector company operations (Please see the relevant company entry for details)


WTE EVN (Austria) 1,000,000 650,000 1,650,000 Suez Suez (Austria) 1,000,000 0 1,000,000 Source: Oldfield, J (1999). The Environmental Impact of Transition – a case study of Moscow city. Geographical Journal, 165, 222-231.

SAUDI ARABIA PART 2: COUNTRY ANALYSIS


SAUDI ARABIA Falling oil prices and finite reserves have forced Saudi Arabia to reconsider its traditional approach of investing heavily in water and desalination infrastructure while failing to maintain these assets. Shifting the onus of the private sector from installation to operation and maintenance ought to optimise the life of installed and planned assets. The country is also seeking to ease its depletion of groundwater for agriculture, although more radical measures are still called for.


Water resources and applications The country is seeking to reduce over-abstraction through a reduction in water from 16.2million m3 pa to 14.9million m3 pa, mainly via a fall in agricultural use from 14.5million m3 pa to 12.6million m3 pa. Even so, this compares with a total surface water availability and annual groundwater recharge of 4.60million m3 pa. In consequence, groundwater supplies have a 15-20 year life, with 85-90% of water currently used for agriculture. Currently water costs US$0.03 per m3 for domestic customers and US$1.60 per m 3 for large industrial customers. Saudi Arabia generates 154,800m 3 of wastewater per day, of which, 113,960m 3 goes to agriculture and related applications. This is a reuse rate of 73.6%. In 1998, 8.2 million m3 of water out of 14.0million m3 of wastewater generated that year was recycled. The Ministry of Water Affairs was formed in 2003. It deals with private sector participation and foreign investments in water, desalination and wastewater reuse projects. The new ministry will also be involved in setting new water tariffs.


Desalination extension plans The sixth Plan (1995-99) sought to have all drinking water obtained via desalination plants. Due to a number of delays and continuing problems with extant plant, the SWCC was given a revised set of targets in 1999. Currently, Saudi Arabia has 24 desalination plants in operation with a 600million gallon per day capacity, or 700,000m 3 per day. SWCC now plans to construct 17 desalination plants (with a total capacity of 2.3million m3) so as to provide a total capacity of 3.0million m 3 per day. In 2003 the National Commercial Bank noted that the SWCC projects a 20-year investment requirement of SR11.5 billion (US$3 billion) a year on water supply and sanitation projects from 2003 to 2022. Saudi Arabia currently utilises 185million m³ per year of treated wastewater effluent. Current production costs for desalinated water in Saudi Arabia are estimated at SR2.7 (US$0.72) per m³, with a full cost of water and wastewater services of some SR4.67 (US$1.33 per m³).


Maintaining extant assets Lack of maintenance has held back the operation of these facilities and their use. For example, the Jeddah 1-4 desalination plants are meant to generate 95million gallons per day, but operational problems means the real figure is some 65-70million gallons per day. In addition, the water network suffers from distribution losses in the region of 40%. This in turn has been causing water table problems, and buildings in the area have not been designed to cope with this. Another example is the Shuaiba facility, which serves the Holy City of al Makkah (Mecca). This plant has a capacity of 50million gallons per day, but had been allocated a maintenance budget of US$0.41 million pa against an operating cost of US$90 million pa (US$1.1 per m 3). Sewerage coverage is less than 60% and the population is growing by 3% per annum. Some 8% of wastewater is fully treated. US$14 billion is needed for basic services over the next 20 years in Riyadh. This includes US$9 billion in water treatment and distribution and US$4.9 billion for sewerage and sewerage treatment.



Freshwater Total (1998, km³) 2.4 Per capita (1998, m3) 119 Withdrawals (1992, km³) 17.0 For domestic use (1992) 9% For industry (1992) 1% For agriculture (1992) 90%

Involving the private sector Short term investment needs of US$17 billion have been identified by the government, along with US$81 billion is needed by 2022 to increase desalination capacity by 6% pa and water treatment by 11% along with developing a suitable wastewater management infrastructure. The private sector is needed to finance this and to bring the eventual cost down. The Agriculture and Water Ministry and regional seven water boards are being rationalised into a new Water Ministry to centralise the management of resources and manage the privatisation process. This involves charging for services on a cost recovery basis before PSP begins. A law was passed in 2000 allowing foreign companies to hold 100% of their businesses in Saudi Arabia as opposed to having to use locally based joint ventures. PSPs are to be carried out under the auspices of the Water & Electricity Company (WEC). Utilities in Saudi Arabia are being taken over by the Utilities Company (UCO) as part of a move towards the full or partial privatisation in the future. The cities of Jubail and Yanbu are being used as pilot projects for private sector involvement with the UCO. The company will be partially privatised via a share sale to the public with 75% being retained by the state through three holding companies. No date has been fixed to date. UCO is to concentrate on water and power for Jubail and Yanbu as outlined below. The Jeddah Water and Sanitary Drainage Authority is seeking to develop a series of BOT projects for Jeddah and Makkah. The private sector is being involved in a series of mooted desalination projects. Sumitomo of Japan is considering constructing a US$2.2 billion co-generation facility for Jubail while VE’s Veolia Water and Suez’s Ondeo Services are looking at other projects, along with Korea’s Doosan. In 2003, (SWCC) and Saudi Electricity Company (SEC) invited international developers to submit expressions of interest for the country’s first independent water and power project, at Shouaiba, 120km south of Jeddah. The first phase will have a water capacity of 176million gallons per day and up to 700 MW in power generation, with the second phase being for 700MW and 24million gallons of water per day. Philippines/Co

Groundwater resources Total recharge (1998, km³) 2.20 Per capita (1998, m3) 109 Withdrawals (1985, km³) 7.34 For domestic use (1985) 5% For industry (1985) 8% For agriculture (1985) 87%

Pilot privatisation at Jubail and Yanbu The first development was a JV between the Royal Commission for Jubail and Yanbu (RCJ and Y) and Bechtel and Parsons Corporation (both of the USA), for a US$1,600-2,000 million general upgrade of the water and wastewater facilities which began 1997. These are the two leading industrial cities in Saudi Arabia. There remains scope for optimising water reclamation through the treatment of domestic and industrial effluent and the recovery and beneficial reuse of treatment effluents. Water Management in Jubail and Yanbu

Population Desalination (m3/day) Reclaimed (m3/day) 1996 2003 1996 2003 1996 2003

Jubail 107,000 127,000 433 700 33 66 Yanbu 57,000 87,000 193 353 15 25

MAJOR CITIES Population 2000 2015 Status Jeddah 3,192,000 5,183,000 Corporatisation under development Mecca 1,335,000 2,063,000 N/A Medinah 891,000 1,429,000 N/A Riyadh 4,549,000 7,536,000 Corporatisation under development



Proposals for Jeddah and al Makkah In 2002, Suez was awarded a contract to oversee an investment programme for al Makkah of more than €10 billion over the next 10 years. The province has 7.5million inhabitants and three major urban areas: the Holy City, Jeddah and Taif. The water situation is especially critical in Jeddah, the second largest city in the country with 2.6million inhabitants. Less than 20% of the city is equipped with a sewer system.

SENEGAL PART 2: COUNTRY ANALYSIS


SENEGAL Water provision services to Dakar and other urban areas were privatised in 1995 through a leas e contract. This contract has subsequently highlighted the limitations inherent with leasing, especially with regards to collecting bills. Senegal has responded by hiring the International Finance Corporation to act as a consultant to see how the contract can be developed so as to optimise performance.

Economics (2002) GDP per capita US$503 GDP per capita (PPP) US$1,580 GDP in agriculture 18% GDP in Industry 26% GDP in Services 58%

Urban water and sewerage services In Dakar, 56% of households were connected to piped water in 2000, along with 22% having access to public standpipes and 25% being connected to the sewerage network. 4% of sewage effluents collected in Dakar is subject to treatment. Average water usage in Dakar is 69l per capita per day. Between 1996 and 2000, access to potable water increased from 67% to 72%. Overall, 51% of the urban population received potable water supplies in 1992, with 85% having access to water by 1996. 20% of water provided to the urban population received treatment in 1992. Nationally, water provision was 28l per person per day in 2000. 33% of the population are seen as not having adequate water availability.


Privatisation proposals Water and electricity services in Senegal have suffered through the inability of the utilities to deal with unauthorised connections and unpaid bills, particularly those of local authorities . These problems were to blame for the financial problems faced by the country’s Regie Autonome de Distribution (RAD). In order to ease the burden of enforcing payments, the Government of Senegal decided to divest its water and electricity services in 1995.


SONES and Sengalaise des Eaux The SONES enterprise was broken up into an asset-owning company, which retained the former utility's name (SONES) and which owns the water assets, and a private operating company, Sengalaise des Eaux (SDE). The government awarded a ten year lease for operating Senegal’s water services in 1996 to a SAUR led consortium. SAUR International and GTHE, a group of local civil engineering firms hold 51% of SDE’s share capital, with Senegalese investors holding 35%, the state 5% and the employees hold the remaining 9%.


SDE is bound to the State Government of Senegal through a performance contract that sets targets for improvement of the service. These criteria relate to facility maintenance, water quality and commercial management, which are monitored by SONES and the Office National de l'Eau Potable (ONEP). The contract also specifies quality, timing, and supply and payment arrangements. In return, SDE can raise prices by 5-7%, net of inflation in order to make the entity self-financing.

SENEGAL PART 2: COUNTRY ANALYSIS


Groundwater Annual availability (1998) 7.60km³ Per capita 844m 3 Annual withdrawal (1985) 0km³ Domestic (1987) 25.0% Industrial (1987) 0.0% Agriculture (1987) 75.0%

The contract in reality Since 1999, it has become evident that the contract has been providing material benefits, even within its financial and operational constraints. Water delivery has increased from 96.3 million m3 in 1997 to 114.6 million m3 in 2002, while revenues rose by 47% between 1996 and 2001 at a time when tariffs rose by 20%. There has been an increase in the number of clients from 241,671 in 1996 to 327,501 in 2001. In the Dakar region (75% of the total service area), the number of private water connections increased from 135,414 in 1995 to 181,824 in 2002. Over the same period, the number of public standpipes in Dakar rose by 5 percent, from 940 in 1995 to 1,424 in 2002. Coverage figures for the Dakar region show that the proportion of the population served increased from 80.3% (1.63million) in 1995 to 89.5% as of the end of 2002 (2.25million people). Leakage remediation has performed poorly because distribution losses turned out to be higher than had been assumed at the outset and indeed both the original and revised technical efficiency targets will not be met, which has impinged upon SDE’s returns, but not to an extent that has jeopardised .

MAJOR CITIES City 2000 2015 Status Dakar 2,078,000 3,481,000 Water services leased to SDE

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Dakar/urban 10 year lease contract SDE


Water Sewerage Total SDE SAUR/Bouygues (France) 3,800,000 0 3,800,000

Source: Brocklehurst, C. & Janssens, J. (2004) Innovative Contracts, Sound Relationships: Urban Water Sector Reform in Senegal. WSSSB Discussion Paper Series, 1. World Bank, Washington DC, USA.

SINGAPORE PART 2: COUNTRY ANALYSIS


SINGAPORE Service provision Effectively, all of Singapore's 3.2million people are connected to the water and sewerage system. All water and sewerage services are managed by the Public Utilities Board (Water Department). The scarcity and cost of water limits average household consumption to 168l per capita per day. Distribution losses have fallen from 11% in 1988, to 8% in 1990 to the current level of below 7% since 2002. Drinking water quality is of a high standard. 99% of the population is linked to the sewerage network. Singapore has 2,000km of sewers, 122 pumping stations and six sewage treatment works (with sea outfalls). These sewage treatment works handle 90% of sewage effluents, 50% to secondary standard and 40% to primary standard. The Ministry of the Environment spent US$2.7 billion on sewerage facilities between 1992 and 2003, as these facilities are expanded and upgraded to secondary and tertiary standard. Three water treatment works are being upgraded between 2002 and 2010 at a total cost of US$107 million, along with a 60 million gallon per day expansion of the main plant at an additional US$115 million. In addition, US$332 million has been spent developing and expanding four storm water treatment and reclamation schemes. Water fees for domestic customers relate to water usage per month so as to encourage water conservation. In addition, there is a separate sewerage charge. Water resources Singapore remains broadly dependent on imported water from Malaysia’s Johor state, with 60% of water resources piped in this way. The first water agreement with Malaysia expires in 2011 (signed with Johor state in 1961) and the second water agreement with Malaysia expires in 2065 (signed with Johor state in 1962). Malaysia is seeking to revise the 1961 agreement, which guaranteed water at US$0.008 per 1,000 gallons until 2061 to US$1.40 per 1,000 gallons or more, despite being operated by Singapore. In response, Singapore aims to reduce its dependence on Malaysia for water through a series of desalination plants and wastewater recovery schemes. An agreement signed by Singapore and Indonesia in 1991 allows the two countries to jointly develop a water transfer system capable 4,546,100m 3 of water per day to supply both Singapore and Indonesia. Water would be transferred via two undersea pipelines of 450 kilometres between Riau’s Kampar River (250km) and Bintan Island and Singapore (200km). It is likely that PSP would be involved, with Darco having taken an early interest in these proposals. Privatisation of water provision In 2002, Singapore’s Hyflux (70%) and Suez Ondeo (30%) gained a 20 year BOT contract to build Singapore's first desalination plant that will supply Singapore with 136,000m³ of water per day by 2005, 10% of Singapore’s anticipated water demand of 1.25-1.36 million m³ per day by that time. This is equivalent to the water needs of some 350,000 people. Ondeo subsequently sold its stake to Hyflux as part of their debt reduction strategy. The next major PSP project is for the fourth and final NEWater reclaimed water project, which would be operational by 2006. The first NEWater project, which uses reclaimed effluents, entered into service in 2003. The proposed project will be a DBOO based on a 20 year 0.116 million m3 per day bulk water supply contract with capital spending currently estimated at US$90-100 million.

SLOVAKIA PART 2: COUNTRY ANALYSIS


SLOVAKIA One of the driving forces behind Slovakia’s ‘Velvet Divorce’ from the Czech Republic was their differing attitudes towards EU accession and environmental management. Water and wastewater management In 2001, 83.6% of the population was supplied with water from public piping, compared with 80% in 1990. Distribution losses in 1996 were approximately 22%, one of the better figures from central and eastern Europe. Connections to sewerage had increased from 37.1% in 1996 to 55.3% by 2002. Only 635 million m3, or about 42% of wastewater released in 1991 was treated. The table below outlines the development of sewage treatment since 1990. Wastewater treatment

(1000m3) 1990 1995 1996 1997 2000 Mechanical (primary) 18,015 48,312 47,847 47,553 53,027 Chemically (secondary) 107 24 801 801 5 Biologically (secondary) 6251 2110 1535 1543 643 Combined (tertiary) 25,238 28,816 37,738 38,721 36,183 Total 49,611 79,262 87,921 88,618 89,858

In 1991, approximately 88,000 tonnes of insoluble substances, 506 tonnes of inorganic salts, and 1,857 tonnes of oil and other petrochemicals were released into the river system. Groundwater quality has begun to deteriorate significantly. In 1991, 87% of water samples were judged unsuitable for consumption against 63% in 1983. Slovakia’s ground water contains high levels of iron, manganese, active carbon dioxide, as well as chlorides, sulphates, nitrates, ammonium ions, and petrochemicals. Water and wastewater plans In 1995, the Government set a series of mid to long term objectives for bringing water management into line with EU norms as well as taking sustainability into account when planning. These include: a 50% reduction in the amount of pollutants discharged in effluents via a 60% increase in the volume of wastewater subjected to treatment, while increasing the proportion of all wastewater subject to secondary and tertiary treatment by at least 20%; reducing the overabstraction of groundwater resources by cutting the agricultural use of groundwater to 30% of current levels; encouraging the recycling of wastewaters so as to bridge the gap between the volume of water extracted and discharged; using water meters to obtain a 30% decrease in the consumption of drinking water, and reducing distribution losses in the water distribution system to 10-15% of total volume. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Trencin 20 year water & sewerage concession TVS Slovakia has seven water utilities. The shares in these companies are in the process of being transferred to local authorities, after which, they will be in a position to be sold to other entities if desired. Bratislavskej vodarenskej spolocnosti (BVS), which serves Bratislava is 59% held by the city council. BVS aims to invest Sk700m (€17 million) in 2004 on capital projects and serves 750,000 people in Bratislava and the west of Slovakia. While PSP for BVS has not been ruled out, the city does not anticipate developments in the near term. Private sector company operations (Please see the relevant company entry for details)


TVS Suez (France) 150,000 150,000 150,000

REPUBLIC OF SLOVENIA PART 2: COUNTRY ANALYSIS


REPUBLIC OF SLOVENIA The Republic of Slovenia gained independence from Serbia in 1992. Slovenia is the most economically and politically advanced part of the former Yugoslav Federation. Privatisation started in 1991, on the basis of the creation of a privatisation agency, but was delayed until December 1992 when the enabling legislation was passed. Management and financial strategy A new Water Act was adopted in 1998, along with ordinances on the water quality standards of surface fresh water and groundwater, the monitoring requirements concerning the quality of surface water and the ecological quality standards of water. Approximately 30% of water costs are recovered through pricing at present. Water and sewerage services are to become self financing in the medium term (2005-2010), through the adoption of a pricing policy for cost-recovery and equitable allocation of water in the Water Act. Domestic and commercial water users are taxed in proportion to the pollution load of the wastewater discharged. Exemptions from the tax can be granted if the revenues are used to fund projects aimed at reducing water pollution. Environmental spending and sources of finance Budgeted spending on water and wastewater was US$391.1 million for 2001-03 and US$519.4 million for 2004-2006. Inland water quality The quality of watercourses improved gradually from 1989 to 1994 due to a decrease in industrial sewage. In 1995 and 1996, the quality of individual watercourses further deteriorated, mostly due to the contents of heavy metals and organic compounds.

Class 1989 1993 1996 1 1 0 0 1-2 4 9 5 2 24 23 20 2-3 39 36 46 3 8 17 15 3-4 14 4 10 4 10 11 4

Organic pollution indicated by chemical oxygen demand (COD) and biochemical oxygen demand (BOD) reached its peak in 1989. Up to 1994, a considerable improvement of the quality of all watercourses was noticed. In 1995, the pollution of some rivers deteriorated again to some degree. Dissolved oxygen in most of Slovenia’s waters poses no problems. The same could be said for phosphate. Water provision Approximately 47% of the total amount of piped drinking-water is used by households, 39% by industry and the manufacturing sector, while 8% are supplied to livestock farms, 5% to the tourist industry and 1% to all other purposes. 77% of drinking water is distributed from public networks, 14% from private wells, 5% from rain water reservoirs and 4% from other sources. Sewerage and sewage treatment In 1996, the sewage treatment capacity was 190million m3 per year, equivalent to 45% of the total amount of effluents discharged. There is a pressing need for the adoption of secondary and tertiary treatment on a broad basis.

Sewerage treatment 1994 1997 None 25% 25% Preliminary 12% 4% Primary 48% 23% Secondary 15% 48%

In 1995 and 1996, four municipal wastewater treatment plants were built or completed. By 1997, 30% of inhabitants are connected to municipal wastewater treatment plants, 45% have septic tanks, with the rest having no formal sewerage or sewage treatment services. Of the 30% connected to the sewerage system, 64% of effluents are treated to secondary standard, with 31% of effluents receiving only primary treatment. The quantities of wastewater from industry and mining have decreased by 60% since 1980. Half of these effluents are treated.

REPUBLIC OF SLOVENIA PART 2: COUNTRY ANALYSIS


Privatisation progress A 25 year concession contract was awarded to Suez and Aquaplus for a sewage treatment works serving the city of Maribor (190,000 people), Slovenia’s second largest city. This was the first BOT wastewater treatment contract to be awarded in central or eastern Europe. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Kranjska Gora 15 year wastewater concession WTE Maribor 25 year wastewater concession Aquasystems Private sector company operations (Please see the relevant company entry for details)


Aquasystems Suez (France)/Aquaplus (Austria) 0 190,000 190,000 WTE EVN (Austria) 0 3,500 3,500

SOUTH AFRICA PART 2: COUNTRY ANALYSIS


SOUTH AFRICA Even though water and sewerage services for the majority of the country’s population remain in a most unsatisfactory state, private sector participation in South Africa is meeting fierce opposition from the Communist party and trade unions. The irony here is that under the Apartheid regime, water was held under state control and subsidised to protect minority interests. While a number of small contract awards have taken place, South Africa has to address the current ANC policy of free water provision up to a certain level which, in the light of recent public health problems, can be seen as a case of ‘free water and cholera’.


Water resources and distribution South Africa is presently the 26th most stressed country in terms of water availability per person. It is a semi-arid country with unevenly distributed rainfall (43% of the rains fall on 13% of the land) and with high annual variability and unpredictability. The industrial heartland of the country, surrounding Johannesburg, is situated in an arid zone. As a consequence, some of the largest inter-basin transfer schemes in the world have been developed. See the country entry for Lesotho for the Highlands Water Project, the largest example of this kind.


Water as white gold? The 1956 Water Act is regarded as having applied the rules of the well-watered countries of Europe to the arid and variable climate of South Africa. The policy and functions of the Department of Water Affairs and Forestry prior to the 1994 elections were constrained exclusively to water resource management. The Department did not regard itself as responsible for ensuring that citizens had a water supply and indeed had no political mandate for such responsibility. The previous regime was characterised by a marked reluctance to ascribe a value to water resources. An estimated R20 billion of water resource infrastructure has been built by the Government, for users who do not pay for their operational, management or capital costs. Investment by the Government was related entirely to political patronage. In consequence, those who were not allowed to vote were effectively excluded from Central Government capital spending.


Reforming water provision The Water Services Act (1997) and National Waters Act (1998) have been designed to provide for the equitable distribution of water resources upon the principles of sustainability and economic prudence. While water rights remain in Central Government hands, they are now to be ascribed with an economic worth and can be operated by the private sector. The National Water Resources Strategy (NWRS) was published in 2002. This envisages resource reviews every five years and catchment management. The role of PSP has been left to state governments: it remains too politically contentious to be dealt with. The Department of Water Affairs and Forestry (DWAF) manages water resources and seeks to ensure that all people have an adequate water supply and sanitation service. Responsibility for water supply lies with local governments, in terms of the norms and standards described in the government's policy. Where local government fails to perform its function, the DWAF is empowered to take direct action to strengthen local government and temporarily perform the functions of local government. Between 1994-2001, the post Apartheid government spent R4.5 bn (€471 million) in cutting the number of people without access to safe water supplies from 14million to 7million. Progress on the 20.8million without adequate sanitation has only been made since 1999. The Government aims to provide universal services by 2010. This works out as 25l of safe treated water per person per day at a maximum distance of 200m from the dwelling. Household connections will not be considered as part of the basic infrastructure because conventional sewerage is not regarded a viable, thus one well-constructed Ventilated Improved Pit (VIP) per household is the minimum



requirement. The 2001 Free Water Policy, guaranteeing 6m 3 of free water per person per month may be populist, but it is preventing rural investment since cost recovery is unfeasible. From 1994 to 2001, the Government spent R5,268 million (€573 million) on service extension, providing water to an additional 7.2million people. In 2004, the Government approved a R21 billion (€2.63 billion) National Water Resource Strategy to allow for a more efficient management of the country's water resources and address water shortages including building about 20 dams. The Strategy will also ensure that about 6million South Africans have access to clean water, while the backlog of about 18million people without sanitation is to be cleared by 2008. At the same time, water budgets at the Ministry for Water Affairs and Forestry (DWAF) are being devolved to local government, with the Ministry’s budget falling from ZAR2,608 million (€349 million) in 2003 to ZAR1,334 million (€178.5 million) in 2004.

Freshwater Annual availability (1998) 44.8km³ Per capita 1,011m 3 Annual withdrawal (1990) 13.3km 3 Domestic (1990) 17% Industrial (1990) 11% Agriculture (1990) 72%

Water and sewerage services (2000)

Inadequate sanitation 51% No potable water 29-34% Inside lavatories 48% Outside lavatories 17% Pit latrines 28% Bucket system 4% Informal 1%

Tariffs need to remain affordable and at the same time, capital spending is needed to reduce wastage and to deliver a perceived improvement in water quality and service. The free basic water policy currently extends to 26million people (66% of those served) and is being expanded to 29million (77%) in the medium term. Larger water users are now being managed on an economic basis. The Government estimates that 46,000 users account for 90% of national water demand. These users will in future be granted water abstraction licences. Suez developed a national partnership to support local workers in building rural water supply systems through training provided by Suez. The aim is to bring clean water to 1million people by 2005. Water tariffs in Johannesburg have risen by 40% between 2001 and 2004 since the start of the Johannesburg Water (JW) contract with Suez. Meters have been installed to dispense 6,000L of free water per household each month. Five million South Africans still require access to a basic supply of water in 2003. A Water Affairs and Forestry survey in Kwa Zulu-Natal found that 56.5% of the schemes were operating below the standards of the reconstruction and development programme. Johannesburg was unable to account for 42% of the water it paid for in 2001.

Groundwater Annual availability (1998) 4.80km³ Per capita 108m 3 Annual withdrawal (1980) 2km³ Domestic 10.6% Industrial 5.6% Agriculture 83.8%

The economics of equitable provision Privatisation and prospects The South African Municipal Workers' Union (SAMWU) and the Communist Party, part of the ANC–led Government are ideologically opposed to privatisation per se. To date, four relatively small and local privatisations have taken place, reflecting a gradualist stance by various parties. One has been for a tourist area (SAUR and Dolphin Coast), one for a municipality (Biwater and Nelspruit) and two are for BOTTs (build, operate, train and transfer) for rural areas (WSSA in the Eastern Cape and Northern Province). WSSA (Suez) serves a total of 2.5million people through a variety of management and technical assistance contracts. The five year Johannesburg Greater Metropolitan Council management contract was awarded to Suez and is tied to US$300 million in financing, equivalent to ten years of capital spending. Perhaps the greatest challenge lies in managing growth projections and usage. It appears the longer term demographic effect of Aids has not been



factored into many water demand management models. In consequence, price changes and capital expenditure deferments are being discussed. Plans for a concession for Cape Town have been postponed. The overriding concern for the city is to provide basic water services to the 92,000 informal households that are currently without such services.

MAJOR CITIES City 2000 2015 Status Cape Town 2,930,000 3,458,000 Some O&M outsourcing Johannesburg 2,950,000 3,811,000 Private sector involvement under consideration East Rand 1,552,000 1,703,000 N/A Pretoria 1,590,000 2,152,000 N/A Durban 2,391,000 3,020,000 Corporatisation of water provision in progress West Rand 1,255,000 1,541,000 N/A Satolburg 1,219,000 1,554,000 N/A Port Elizabeth 1,006,000 1,150,000 N/A

A full privatisation - Nelspruit The privatisation of Nelspruit water services was agreed in early 1999 after 28 months of negotiations. The concession is worth R350 million for the running of the council’s water and sanitation services, covering all of Greater Nelspruit's 260,000 residents. This is the first municipal deal for privatised water and sanitation in South Africa. Two former townships and six peripheral urban areas have been incorporated into Greater Nelspruit. Most of the people have not yet enjoyed regular running water, or acceptable sanitation services. The JV is run by Biwater International (40%) and Sivukile Investments (60%). The consortium will pay the council R1.25 million a year for monitoring the process. The consortium will invest R150 million in the next five years to improve water and sanitation in the town. Progress on the deal will be reviewed by the council in five years. In addition, billing arrears of more than R20 million needs to be dealt with. This concession is seen as a battleground by the anti privatisation lobby and thus it remains contentious irrespective of its actual performance.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Dolphin Coast 30 year water and sewerage concession Siza Water Co. Nelspruit 30 year water and sewerage concession Biwater Queenstown 10 year BOTT concession WSSA Fort Beaufort 10 year BOTT concession WSSA

Siza Water: A tourist resort concession In 1999, the borough of Dolphin Coast (56,000 people) awarded a 30 year concession to SAUR’s Siza Water. US$172 million of investments are to be made during the life of the concession. Siza Water forecast a 40-50% increase in service demand after the contract award, but has subsequently seen demand rise by just 5% in 2002. Since the concession award, operation and maintenance targets are on track, it has increased the number of employees, uses 3% of salary bill for staff training and has encouraged staff share ownership. Distribution losses have fallen from 30% to 16%, with an increase in tariff collection from 75% to 97%. Customers choose from four levels of service: (1) Community has own service (no service from Siza Water); (2) standpipe with VIP, per household; (3) 200 litre water tank and septic tank, per household and (4) full water connection and flush toilet. Residents may start at level 2 and upgrade to 3 or 4 as affordability levels improve. Future challenges include further enlargement of the municipal area and a pricing policy, which is based on cost reduction and cost recovery rather than a pro-poor policy.


Water Sewerage Total Metsi a Sechaba Biwater (UK) 270,000 270,000 270,000 Siza Water Company SAUR/Bouygues (France) 56,000 56,000 56,000 WSSA Ondeo (France) 300,000 260,000 300,000

Sources: L J Abrams (1996). Policy Development in the Water Sector – The South African Experience. Cranfield International Water Policy Conference, Cranfield University, UK, September 1996. M Pillay & G Moloi (2002). Bridging the gap: greater understanding between public and private sectors will extract the best from both – what could this mean for Africa’s water sector? Water 21, Africa Energy Forum, London, July 2002.

SOUTH KOREA PART 2: COUNTRY ANALYSIS


SOUTH KOREA Private sector involvement has opened up for sewage and effluent treatment projects over the past year. This is to finance a comprehensive water and sewerage service extension and upgrading plan over the next 12 years. This in part reflects a realisation that South Korea, like Japan, has missed out on opportunities in what would typically be regarded as their home markets.


Sewerage and water quality River water quality has improved since 1988: between 1994 and 1997, W5.6 trillion (US$4.6 billion) was spent on water pollution control, including the construction of 52 sewage treatment works.


Management The Environment Administration (founded 1980) was upgraded to ministerial status as the Ministry of Environment in 1990, with specific bureaux for water and sewerage opened in 1994. The Pollution Prevention Act (1963, revised 1971) was replaced by the Environmental Preservation Act in 1997, which in turn has become the framework for 24 separate Acts between 1990 and 1997, including three relating to water quality and sewerage and two for water resources management. The main legislation is contained in the Water Quality, Water Supply and Sewer Systems Acts. Green Vision 21 (1996-2005) is aimed at forming a comprehensive environmental compliance programme for the country. Korea is keen to comply with OECD norms.


Infrastructure plans The Comprehensive Measures for Water Management is due to run between 1996 and 2011. A total budget of W90.9 trillion has been allocated (US$75 billion) for these projects. This includes W28.9 trillion (US$24 billion) for environmental im provements by 2005, including W26.9 trillion (US$23 billion) for the construction of 224 sewage treatment works. In addition, 43,786km of new sewage pipes are to be laid. The Government aims to see the percentage of rivers of fair/good quality rise from 14% in 1995 to 70% by 2001. Development of water sewerage systems

People served (million) System capacity (000 gallons/da y) Water Sewerage Water Sewerage

1995 38.82 24.42 22.91 11.45 1997 39.61 28.60 23.96 15.04 1998 40.19 31.10 25.70 16.62 1999 40.95 32.54 26.59 17.71 2000 47.93 33.84 26.34 18.40

Under Green Vision 21, South Korea seeks to raise access to piped water to 95%, along with 80% connection to the sewerage network and 80% sewage treatment. The figures below are from the 1997 interim assessment.

Piped Water Potable Water Sewage Treatment 1995 (actual) 83% 43% 45% 2001 (planned) 90% 85% 65% 2011 (forecast) 95% 90% 80%

It is understood that a fundamental restructuring of water supply and sewage services will take place in 2005, based on the creation of seven full water services public companies: KOWACO (national), Seoul, Pusan, Inchon,

SOUTH KOREA PART 2: COUNTRY ANALYSIS


Daejeon, Daegu, and Gwangju. This aims to enable the Korean water services industry create players in the market to compete with companies active in Asia. However, institutional settings to support the restructuring are weak, with issues such as water pricing, the reduction of water leakage, systematic management of water supply still needing technical as well as institutional support.


Privatisation prospects Private sector involvement and funding in the construction of water treatment facilities was permitted in 1994. This has been extended to allow BOT contracts, including foreign companies if they work in partnership with Korean companies. VE and Suez have gained sewage treatment contracts, VE has also gained a comprehensive effluent management contract with Hyundai, its South Korean partner company. VE anticipated being involved in the construction of 26 sewage treatment works for a total of US$1 billion. The two contracts signed to date involve US$344 million of capital spending. While water treatment plants have yet to be privatised, this remains possible. Water treatment plants built by Degremont account for 20% of drinking water in Seoul and 80% of Busan’s.

Groundwater Withdrawals (1985, km³) 1.0 For domestic use (1985) 0% For industry (1985) 83% For agriculture (1985) 17%

MAJOR CITIES Population 2000 2015 Status Seoul 9,888,000 9,918,000 Privatisation under consideration Pusan 3,830,000 3,857,000 Sewage treatment privatised Inchon 2,884,000 3,270,000 Sewage treatment privatised Taegu 2,675,000 2,698,000 Privatisation under consideration Taejon 1,522,000 1,636,000 N/A Kwangchu 1,379,000 1,395,000 N/A Songnam 1,353,000 2,184,000 N/A Ulsan 1,340,000 1,800,000 N/A P’ohang 790,000 1,275,000 N/A Puch’on 900,000 929,000 N/A Suwon 876,000 907,000 N/A Ansan 984,000 2,230,000 N/A

City Study: Seoul 20million people live in Seoul and the Han river basin, accounting for nearly half of the country’s population. Industrial development and population increases resulted in a consistent decline in raw water quality for the Seoul between 1990 and 1997. The 1997 Act relating to Water Resource, Water Quality Improvement and Local Resident Support in the Han river watershed was implemented to improve the quality of water entering the Paldang reservoir and the Han river, which supply 12million tonnes of water per day to the city. Wastewater treatment is to be improved from 59% to 82% by 2005 at a cost of W2.7 trillion (US$2.3 billion), partly financed by a water use charge system that aims to raise W200 billion (US$167 million) pa. In addition, the proportion of liquor and telephone taxes that are allocated to water and wastewater projects is being raised from 21% in 1997 (equivalent to US$500 million pa) to 30% by 2003. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Chilgok-gun 20 year sewage treatment BOT VE/Hyundai (Korea) Inchon 20 year sewage treatment BOT VE/Hyundai (Korea) Pusan 28 year sewage treatment BOT Suez/Hanwha (Korea) Yangju 24 year sewage treatment BOT Suez/Hanwha (Korea) Private sector company operations (Please see the relevant company entry for details)


Suez Suez (France) 0 900,000 900,000 VE VE (France) 0 2,550,000 2,550,000

SPAIN PART 2: COUNTRY ANALYSIS


SPAIN The private sector has been making steady progress over the past decade, with the emergence of an increasingly competitive market. This has also resulted in a wide range of contract gains internationally, especially in South America. The recent decision to abandon water transfer in favour of desalination may have similar repercussions.


Water quality and resources Survey information is relatively poor at present. The firs t national survey was carried out in 1990 and was based on informal data. It found 40% of rivers to be of Class I – II/III (good to fair) and 60% to be of Class III – IV (fair to bad) quality. A 1999 survey of rivers, using 489 data points found 222 to be of good to excellent quality (45%), 207 of fair to poor quality (42%) and 60 to be of bad quality (13%). Water shortages are a widespread concern. These occur in the eastern Pyrenees, Guadalquivir, Segura, southern Spain, the Balearic and Canary Islands. In Andalusia and Extramadura there are regular supply limitations during the summer. Water is both unevenly distributed and rainfall is markedly seasonal. Overall, there is an ‘excess’ of 27billion m³ of water per annum, 92% of which is found in northern Spain in the Duero, Tagus and Ebro basins. This means that more than 50% of current water resources are not being exploited. However, other areas have a minimum shortfall of 2.6billion m³ pa. Overall, 18.5million people live in areas of water stress. Distribution losses have exacerbated these regional problems. Supply efficiency for irrigation projects is in the region of 40%, while the urban water network has distribution losses ranging from 25% to 50%. Management and politics The main problem for those seeking to modernise the management of Spain's water resources is that the great disparities in water availability and need means that regional interests will continue to block plans to integrate its water management. What are known as the nine hydrographic confederations (river basin agencies) are seen as impotent, especially when it comes to monitoring water quality. There have been plans for an overall increase in water availability of 20.0billion m³ pa by 2010, of which 3.2billion m³ pa (16%) would come via groundwater. The shortfall for the Balearic and Canary Islands is to be tackled via new desalination plants. Demand for urban and industrial water by 2010 is expected to be 15billion m³ pa, or 850 L/day per capita. But the long term problem areas , with a projected deficit of 6.7billion m³ pa will remain, especially along the Mediterranean coast, Andalusia, Eastern Pyrenees, Guadalquivir, Segura and Jucar. The National Hydrological Plan proposed in 2000 was abandoned following the Socialist Party winning the 2004 elections. Plans for 17 desalination plants at a cost of €3.8 billion as an alternative water source for the southern areas of Spain are under consideration.


Development of sewerage infrastructure In comparison to most of the major western economies, Spain’s sewerage and sewage treatment infrastructure remains at an undeveloped stage. The table below highlights that, given the undeveloped state of the system prior to the end of the Franco regime in 1976, the country has in fact made appreciable strides towards modernisation. Sewage treatment

Population served 1975 1980 1990 2000 Tertiary treatment 0% 0% 4% 4% Secondary treatment 7% 16% 38% 58% Primary treatment 7% 13% 11% 21% None 86% 71% 47% 17%



The proportion of Spain’s population connected to sewerage services increased from 18% in 1980 to 86% in 2000.

Urban services % Water 97% Consumption (L per day) 265 % Sewerage 95% % Sewage treated 70%

Making a market for water In 1997, Spain considered developing a water market to encourage external investment and open the market up for more privatisation while restricting the role of the state. At the time, this was in response to the drought of 1995 and 1996, thus the temporary respite offered in 1997 and 1998 eased political pressure for reform. A further drought in 1999 has concentrated minds again. In September 1999, Spain's parliamentary environment committee used fast-track procedures to approve new legislation designed to improve water conservation. The reform creates a market in water with the aim of rationalising the use of resources by allowing water rights to be bought and sold. In addition, the legislation allows for the establishment of water banks, as seen in California, which will allow the Spanish Government to redirect water resources to priority sectors of need. The law will also make obligatory the metering of water used for irrigation and creates a regulatory framework for new water-conservation schemes such as desalination and the use of grey water on parks and golf courses. At the same time, the implementation of a national hydrological plan to provide a long-term solution to the problem of Spain's scarce and unequally-distributed water remains as contentious as at any point over the past decade. Generally speaking, there is an inverse relationship between water scarcity and price. Many municipally held entities in the water short regions of southern Spain continue to provide water at a loss. In Barcelona, the price of drinking water is Ptas211 per m3 for water, compared with Ptas150 per m3 for the rest of Catalonia and a Spanish norm averaged at Ptas70 per m 3.


Privatisation and the private sector The private sector is making steady progress in Spain. This has been compounded by the generally held belief amongst the municipally held sewerage companies that until EU laws are impending, they need not be considered. The €18.8 bn 2001-08 Plan Hidrologicio Nacional Capex includes €2.82 billion for urban water supply, €2.72 billion for water transport, €2.61 billion for wastewater treatment and €1.26 billion for water quality imporovements. Structure of market in 2000

Population Private Public Up to 10,000 2,510 5,224 10,000-50,000 288 208 50,000+ 59 56

Private sector involvement dates back to Aguas de Barcelona’s original water provision contract in 1911. Private sector progress was limited during the Franco era, but since 1976, it has made steady inroads. FCC and Aguas de Barcelona (part of Suez Lyonnaise via direct and indirect stakes) were the only private sector players until 1985. Effective competition has only emerged since 1991, after which Aguas de Barcelona has gained some 50% of all contracts. Aguas de Valencia (30% held by Bouygues) has been gaining a number of small contracts in recent years. Dragados entered the water and sewerage market in 1991, having been responsible for approximately 30% of Spain’s water and sewerage construction work since 1951. Ferrovial and Iberdrola are also building up portfolios of contracts, the latter having acquired Obrascom’s water activities in order to gain economies of scale. The private sector is gaining contracts for serving 650,000–900,000 people pa. By 2010, it is expected that 65-75% of the Spanish water provision and sewerage market will be privately held. The higher figure depends upon the fate of Madrid’s Canal Isabella II. Many water and sewerage services are currently being run at a loss by municipalities. Agbar believes that it has 55% of the private sector. In 1992, 63% of the sewerage market (where sewerage services are provided) was in private sector hands and 32% of this was estimated by FCC at the time to be under their control.



Groundwater Total recharge (1998, km³) 20.7 Per capita (1998, m3) 521 Withdrawals (1990km³) 6.0 For domestic/industry (<1990) 22% For agriculture (<1990) 78%

Corporatised entities Canal de Isabel II (CI II) was founded in 1851 to provide Madrid with water. It has consistently been under the direct ownership of the municipality and operates as a corporatised entity. CI II serves 4.6miilion people for water and 3.1 people for sewerage and is financed through internal cash generation and syndicated loans for longer term capital spending work. CI II may be broken into two or three parts if and when it is privatised. After the backlash against the original privatisation moves, the company has been told to desist from bidding for international contracts and despite some success in Spain, to avoid seeking contracts outside Madrid and Castilia. Comphana de Aguas de Grande Bilbao is a consortium of 48 Basque town councils. The consortium is looking at contracts in Uruguay, Argentina and Morocco and had a budget of €104.5 million for 1999. The company gained the final Province of Buenos Aries regional concessions in Argentina in 1999. The municipalities of Bilbao, Tarragona, Pamplona and Santander have formed their water provision and sewerage companies into separate entities, which are distinct from their municipalities, even if held by them.

MAJOR CITIES Population 2000 2015 Status Barcelona 2,729,000 2,729,000 Aguas de Barcelona Madrid 3,976,000 3,976,000 Corporatised, but no privatisation before 2002+

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Albacte Water and sewerage concession Aguas de Barcelona Cadiz Water treatment Canal de Isabell II L’Ampolla Water and sewerage concession Aguas de Valencia Masalfassar Water and sewerage concession Aguas de Valencia Oviedo Water and sewerage concession FCC Sabadell 50 year water provision concession Aguas de Sabadell Salamanca Water and sewerage concession FCC Valladiod Water and sewerage concession Aguas de Barcelona

Only selected recent contract gains above are included. Aguas de Sabadell is a semi private company formed for water provision services to the municipality of Sabadell.

Private sector company operations (Please see the relevant company entry for details_ Company Population served

Parent company (country) Water Sewerage Total

FCC FCC (Spain) 7,200,000 9,500,000 9,500,000 Aguas de Barcelona Suez (France) 11,440,000 13,250,000 15,000,000 Aguas de Valencia AgVal / Bouygues (France) 2,040,000 700,000 2,040,000 Urbaser Grupo ACS (Spain) 2,200,000 500,000 2,200,000 Ferroser Ferrovial (Spain) 350,000 100,000 350,000 Iberner RWE (Germany) 270,000 270,000 270,000 Pridesa - Ondagua RWE (Germany) NA NA 3,100,000 OHL OHL (Spain) 300,000 350,000 3500,000

SRI LANKA PART 2: COUNTRY ANALYSIS


SRI LANKA Management In 1980, the National Environment Act (NEA) was passed and the Central Environment Agency (CEA) was formed. The CEA was given enforcing powers through an amendment of the NEA in 1988, which has been exercised since 1990. The drinking water supply system is managed by the National Water Supply and Drainage Board (NWSDB). Water investments and plans The Government has set a target of total coverage by water supply and sanitation by the year 2010 through its National Programmes. Water supply had reached 70% coverage by 1994, with sanitation at 50% coverage by the same time. In rural areas sanitation projects are implemented by different agencies with donor assistance, while urban areas have been somewhat neglected. 3.7million people (21%) live in the urban areas in Sri Lanka, of which an estimated half resides in the low income settlements. The infant mortality rate in these areas is between 32 to 54 per 1,000 live births, compared to the national average of 19.4%. Proposals for new investments average US$61 per capita in the Western Region (including the capital, Colombo) which already has the highest existing sewerage coverage of 73%, whereas per capita investments in the Southern Region, for example, are proposed at US$8 per capita which presently has only a 47% coverage.

Monthly consumption (m3) Monthly bill (Rs) 2000 2001 200 2001 Greater Colombo 22.40 21.95 199.62 235.17 Regions 17.70 16.50 113.02 125.67 Average 19.67 19.15 154.27 178.95

Revenue collection started in 1982 and since the 1990s, these have been used to encourage water conservation. As a result of the progressive billing scheme, per capita daily consumption has decreased from 200L per day in 1995 to 140L in 2003 with the medium term of reducing this to 100L. Tariff collection rates between 1993 and 2001 have been between 89% and 99%.

Non revenue water, 2001 NWSDB overall Colombo City Leakage 23% 25% Free supplies (standpipes) 4% 15% Illegal connections 4% 8% Metering errors 4% 5% Total 35% 53%

Privatisation pondered The World Bank is seeking to reform the water sector, along with private sector participation, so as to achieve the Sri Lankan Governm ent's aim of "safe drinking water for all" by 2010. This would require an annual investment of US$200 million for 10 years. In 2003, the World Bank provided a US$39.8 million grant for improving access to drinking water and sanitation for 940 villages in war-affected areas of Sri Lanka. Over the past 10 years, the annual allocation has been US$100 million, of which US$80 million had been annually disbursed. Private sector involvement and finance ought to be mobilised according to the World Bank, with wealthier people, who are connected to the capital Colombo's sewerage system, being made to pay the operation and maintenance (O&M) costs of a proposed new system, and not the state. In reality, this all-or-nothing approach towards PSP has probably resulted in the postponement of appropriate contracts being put into place. Instead of seeking O&M contracts for populations of 50-200,000 people, full concessions were sought in the Kalutara to Galle Coastal Strip project. As a result, while O&M contracts may be used in the medium term, concessions outside Colombo are unlikely before 2015-20. Currently, Manila Water Company (Ayala Corporation and United Utilities) is considering developing a suitable form of contract for 500,000 people in the Kalutara to Galle area, which requires some US$218 million in investment. In the meantime, NWSDB is considering the potential for outsourcing leakage detection and repair services, bill collection, new water connections and fleet management. The Water Services Reform Bill was introduced in November 2003. However, The Alliance for the Protection of Natural Resources and Human Rights challenged it in the Supreme Court, which has effectively blocked the bill, saying that it must be approved by all provincial councils. The main opposition party, the People's Alliance (PA), is in power in six of the seven provincial councils currently functioning.

SWEDEN PART 2: COUNTRY ANALYSIS


SWEDEN Sweden has for some time been held as an example by various anti-privatisation NGOs. While services are clearly outstanding, their costs are hard to bear. Thus the VE contract award is not a total surprise. Perhaps there are two motivations for this. The need to manage costs at home and the appreciation that market opportunities are being missed abroad are having gradual repercussions.


A purist approach Given that the water flowing from Stockholm into the sea is regarded as fit to drink, it is evident that environmental compliance in Sweden follows the country’s singularly purist agenda rather than allowing itself to be held back by the ambitions of other nations. The country remains understandably content to plough its own furrow and is set to remain committed to municipal water ownership and management for the short term. This approach has been a twin edged sword commercially, with entities such as Stockholm Water being forbidden from seeking international privatisation contracts despite their service delivery record at home and the high regard in which their consulting work abroad is held.


Water provision There is no shortage of fresh water in Sweden. The total volume of fresh water used is 3.3 billion m3 pa. The use of fresh water in households in 1994 was as follows: personal hygiene; 30%, cooking; 5%, cleaning and car washing; 10%, sanitation; 20%, laundry; 15% and dish washing 20%. Nearly 100% of the drinking water from the urban municipality water plants is more or less treated. In contrast, in Sweden official water distribution losses are seen as being in the region of 20-22%.


Structure of ownership The 300 water suppliers in Sweden are either municipalities or municipally owned and have a monopoly in their respective areas. The water and sewerage sectors are seen as parts of the municipalities. There is no general desire to see privatisation in the near future. In addition, Sweden has some 800,000 private wells.


Financing services Every landowner has the right to groundwater resources below his property and small lakes are likewise private, but larger ones are in the public domain. For agricultural use there is no pricing policy. In the case where the water is delivered by the municipality, the industry will pay for the production of water, the delivery and the treating of wastewater at cost price. Where the water is delivered by the municipality the households pay for distribution and treatment of water and wastewater at cost. Overall, almost all cost for water production, delivery and wastewater treatment are currently recovered through pricing policies already in force. The objective is to reach full cost recovery.

SWEDEN PART 2: COUNTRY ANALYSIS


Groundwater Annual availability (2000) 20.0km³ Per capita 2,245m 3 Annual withdrawal (1995) 0.6km³ Domestic (1987) 92% Industrial (1987) 8% Agriculture (1987) 0%


1980 1990 1995 Tertiary 61.0% 85.0% 87.0% Secondary 20.0% 9.0% 6.0% Primary 1.0% 0.0% 0.0% Sewerage only N/A 1.0% 0.0% Not connected N/A 5.0% 7.0%

The proportion of the population connected to sewerage services increased from 82% in 1980 to 93% in 1995. The target is for 100% coverage in the medium term. 100% of urban sewage is treated, although there is no plan for the recycling of wastewater. Development of sewage services

Sewage treatment 1970 1975 1980 1985 1990 1992 Primary 19% 3% 1% 1% 1% 1% Secondary and tertiary 44% 78% 81% 93% 93% 94% Total 63% 81% 82% 94% 94% 95%

By 2000, Sweden had already more than satisfied the UWWTD with 95% of the population served by tertiary sewage treatment works. In addition, 54% of all sewage undergoes advanced treatment. MAJOR CITIES City 2000 2015 Comments Stockholm 1,612,000 1,704,000 PSP currently ruled out Göteborg 778,000 808,000 PSP currently ruled out Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Norrtalje 10 year contract, water and wastewater VE A number of local O&M contracts were undertaken with local companies on a trial basis in the late 1980s and early 1990s. in 2003, there were six municipalities that had outsourced their water activities. All of these are with Swedish companies such as Ragn-Sells, Skanska and NCC with the exception of Norrtalje, which awarded a contract to VE in 2002. Private sector company operations (Please see the relevant company entry for details)


VE VE (France) 50,000 50,000 50,000

SWITZERLAND PART 2: COUNTRY ANALYSIS


SWITZERLAND Sewerage runs like clockwork The proportion of the population connected to sewerage services increased from 70% in 1980 to 90% in 1990. 180 out of the 900 municipal sewage treatment works are regarded as being in need of upgrading or replacement. By 1995, most sewage treatment works were seen as being UWWTD compliant, even though many lakes will fall into the sensitive waters category. 97-98% of urban domestic sewerage is treated, and 97% of this is to at least secondary standard. Switzerland seeks to have 100% of urban effluents treated in the medium term. 55% of these effluents were recovered for agricultural use in 1994. Investments in sewerage and sewage treatment accounted for SwF2 billion in 1997. Sewerage and sewage treatment

1980 1990 1995 2000 Tertiary 41% 62% 71% 82% Secondary 32% 28% 23% 14% Primary 0% 0% 0% 0% Sewerage only N/A 1% 0% 1% Not connected N/A 9% 6% 3%

Water services remain a public sector concern The municipalities own all sewerage services, which were typically formed between 1950 and 1970. There are some corporatised water services, in that they were formed prior to 1950 and can have some private capital. However, the water and sewerage sectors are seen as parts of the municipalities and in 1996, Switzerland reaffirmed that privatisation is not to be considered in the foreseeable future. Indeed, existing shares of water concerns in private hands continue to be purchased by the municipalities. Water tariffs are intended to recover 60-80% of costs, while sewerage service charges seek to cover at least 90% of costs so as to encourage preventative measures

TAIWAN PART 2: COUNTRY ANALYSIS


TAIWAN Political and economic liberalisation are creating opportunities in Taiwan for the medium to long term. BOT projects for transport have been permitted since 1997 and the state’s engineering, power and telecommunications companies are either partly privatised or in the process of privatisation. The country is approaching privatisation cautiously, but a shortage of funds for developing the sewerage infrastructure is creating opportunities for international companies.


After Japan, Singapore and Hong Kong, Taiwan vies with South Korea as the most developed of the Asian economies. It also resembles South Korea in recently unveiling a cautious liberalisation programme that intends to encourage international investment in water and sewerage infrastructure development and services operation in the medium term. The first BOT infrastructure contracts of any kind were awarded in 1997, with the first such contract for bulk water provision being awarded in 2002. There are currently no plans for stake sales of water concerns.


Organisation and regulation The Ministry of the Interior is responsible for sewers, with the Central Government looking after the financing. The Taiwan Water Supply Corporation is in charge of overall water supply, while the Taipei City Water Supply Department looks after Taipei. The Water Resources Planning Commission reports to the Environmental Protection Administration (EPA), which in turn asks the Government for funding and advises on spending priorities. Construction is approved on a local basis. The two main items of legislation are the Water Pollution Control Act, 1974 (revised in 1991) and the Drinking Water Management Act, 1991 (revised in 1997), along with various Regulations on effluent standards passed between 1988 and 1997. The monitoring of water availability and its use is of a high quality. This reflects the potential constraints that Taiwan’s water resources may impose on economic growth and rising consumer expectations. Actual regulation was marked by a progressive relaxation of effluent limits in the mid 1990s in order to stimulate economic development. Nevertheless, the market for pollution control equipment in the country has been growing at 6-7% pa between 1996 and 1999. The EPA carries out end of pipe audits of industrial discharges. They have resulted in 11,000 fines between July 1994 and June 1998 for violations of effluent discharge limits.

Urban Services Safe drinking water (1991) 84% L per capita per day 3,112 % Sewage treated (1997) 7%

Water resources 3,156 m³ per capita pa of water is available, of which, 28% is currently utilised. Water distribution losses are estimated at 20%. 20% of the population relies on groundwater as the primary water source. 78% of rainfall takes place between May and October. The maximum potential for sustainable water abstraction is estimated at 20 billion m³ pa, without further infrastructure development. Investment in water provision and distribution accounted for 0.87% of GNP from 1953-1992. Groundwater supplies between 21% (wet year) and 41% (dry year) of water needs. Groundwater shortage in Taipei and the city Kaohsiung affect industrial concerns as almost all the domestic water for these cities is obtained from river water. Reservoirs supply 18 – 20% of needs depending on the level of rainfall, having a total capacity of 2.1km3. Water demand forecasts Total extraction of water was 19.5km3 pa in 1997, and is forecast to rise to 21.2–23.0km3 by 2036. Domestic water consumption accounted for 2.4km3 in 1997, and is forecast to rise to 4.2–5.0km3 by 2036, while industrial water consumption accounted for 1.7km 3 in 1997, and is forecast to rise to 2.0–3.0km 3. Use of water in agriculture is expected to be constant at 15.4km3. These forecasts point to an excess in demand over currently



sus tainable resources of 1.2–.0km3 per annum by 2036. While distribution losses can be reduced from their current level of 20% to perhaps 15-18%, further development of the country’s reservoirs and bulk water supply network looks necessary in the longer term.

Internal renewable resources Total (1998, km 3) 64.5 Per capita (1998, m3) 2,972 Withdrawals (1997, km3) 13.5 For domestic use (1997) 13%

Development of water services Access to piped water rose from 69.5% in 1981 to 84.2% in 1991. In 1996 water utilities in Taiwan provided 8.45 million m 3 of drinking water per day to 15.33million people. Domestic usage rose from 66m3 per capita per annum in 1977 to 121m3 per capita per annum in 1995. Water quality standards Drinking water quality is assessed under Article 11 of the 1997 Drinking Water Management Statues. 15,000 samples per annum are taken. Until recently, source contamination had caused some deterioration in water quality. Drinking water quality:

1991 98.17% pass 1996 97.03% pass 1997 99.10% pass 1998 99.59% pass 1999 99.54% pass

Over-abstraction of groundwater has resulted in saltwater ingress, while river quality has declined because of uncontrolled discharges. Effluent discharge of Taiwan

(1990) m m³ / day % of BOD Domestic sewage 4.295 23.2% Industrial effluent 2.908 53.5% Agricultural effluent 0.447 23.3%

River water quality 1983 1990 Good / Very Good 74% 65% Fair 4% 8% Poor 17% 16% Bad 6% 11%

In 2001, 35% of rivers were of bad to fair quality. Sewerage infrastructure At a national level, 7% of sewage was treated in 1996, all of this being in Taipei. Taipei’s main sewage treatment work offers primary treatment (5% of sewage), with the remaining 2% treated by two 20 year old secondary STWs and two small tertiary STWs. The EPA has drawn up a three-stage plan for treating up to 70% of the country’s effluent load. Phase 1, covering Taipei will result in 17% of sewage being treated. The official target for Phase 2 is for 40% of sewage effluents to be treated by 2000. This is currently running some years behind schedule, with the 1998 National Environmental Protection Plan aiming for 26% of sewage to be treated by 2011 and 7% of effluents treated in 2001. The main period of construction is expected to be from 2003 to 2010. The EPA’s long-term (Phase 3) aim of reaching 60-70% sewage treatment is now unlikely to be attained until 2015-20. Phase 2 includes covering Kaohsiung and 11 other areas, while Phase 3 plans to extend to Taichung (0.84million people). Phase 3 has not yet been formally approved and requires financing to be organised. Sewage treatment plan

Phase Cost (NT$) Capacity (m³ / day) 1 40billion 1.3million 2 106billion 2.2million 3 TBA 1.8 – 2.6million



Improving river water quality Since 1998, the Bureau of Water Resources has overseen the development of five water quality protection zones. The river basins involved provide water for 14million people. The River Basin and Marine Management Plan will cost NT$147.1 billion and run from 2001-11. The 1998 National Environmental Protection Plan sets river water quality targets until 2011.

Year 1996 2006 2011 Unpolluted river waters 62% >68% >70% BOD reduction (t/day) 2,336 2,475 2,568

Policy implementation At present there are no fees for wastewater discharge. Industrial effluent has been charged since 2002, while there are no current plans to charge domestic customers.

Groundwater resources Total recharge (1998, km3) 4.0 Per capita (1998, m3) 184 Withdrawals (1997, km3) 6.0 For domestic use (1997) 2%

Private sector opportunities The sale of stakes in water and sewerage entities remains some years away. Sewerage is currently being considered for privatisation, probably during the next 5-10 years. Water supply is unlikely to be privatised for 10-20 years. In the meantime, the first bulk water provision privatisation award was made in 2002 to Suez.

MAJOR CITIES Population 2000 2015 Status Taipei 2,550,000 2,678,000 Privatisation probable in the medium to long term Kaoshiung 1,463,000 1,697,000 Suez, water treatment

City study: Taipei Water supply and sewerage services in the metropolitan area are run by the Taipei City Water Department. All 1,189,095 households were connected to the water supply in 1993. Water use was 675million m³ pa, with an average daily consumption of 281L per capita. The water tariff operates on a sliding scale with an average tariff of US$0.244 per m³ with charges increasing above 10m³ pa, with no surcharge for sewerage services. All properties are metered. Distribution losses are estimated at 24%. Seven water treatment works treat 2.74million m³ per day, Chitan IV being completed in 2001, with a capacity of 0.5million m³ per day. A further facility (Chitan V) will be constructed by 2011. Sewage effluents total 0.68million m³ per day or 247million m³ pa, 93% of which comes from domestic sewage, via 422,379 septic tanks, with the remaining 30% of the city connected to mains sewerage. By 2002, 59% of households were connected to mains sewerage. Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Kaoshing 17 year water treatment BOT Ondeo In 2002 the Taiwan Water Supply Corporation awarded Suez and Ecotek (China Steel of Twiwan) a contract for the overhaul and operation of a drinking water plant in Kaohsiung. The contract is worth €200 million, of which Ondeo Degrémont’s share is €90 million, covring equipment overhaul, building new facilities and operating the new plant for a period of 15 years. The new facility will produce 450,000m3 of drinking water per day from March 2004. While the city has 1.5million people, the facility will also serve a further 1.5million living in outlying towns and suburbs. Private sector company operations (Please see the relevant company entry for details)


Ondeo Suez (France) 3,000,000 0 3,000,000 Note: The United Nations does not recognise Taiwan’s separate existence (while doing so for Hong Kong), so the economic and population data used is not strictly comparable with the rest of this publication. ROC Government and EPA statistics have been used (yearbooks and from their respective web sites).

TANZANIA PART 2: COUNTRY ANALYSIS


TANZANIA Political considerations have led to the neglect of Tanzania’s urban water and sewerage services. This is notably the case in Dar es Salaam. Privatising these services carries the potential of generating real improvements in service delivery from an exhausted infrastructure. Affordability issues will need to be carefully handled.

Economics (2002) GDP per capita US$267 GDP per capita (PPP) US$580 GDP in Agriculture 45% GDP in Industry 15% GDP in Services 40%

An experiment in need of fine tuning?

In the 1960s to 1980s, Tanzania was placed within the idealistic end of the African political spectrum. A fairly austere form of socialism was adopted, which, while well intentioned, did little to encourage the development or maintenance of water or sewerage services. By 1993, only 22% of households in Dar es Salaam were connected to piped water and 6% had sewerage services. Approximately 35% of the city’s sewage was treated. Nationally, in 2002, 65% of the urban and 43% of the rural population have access to potable water within 400 metres. The 1990s saw a fundamental re-appraisal as to the role the private sector can play in the development of public services. In 1999, Dar es Salaam got a US$117 million loan from the World Bank for the installation of 100,000 water meters as a first phase towards a water demand management and distribution loss identification strategy. The city has 35-40% distribution losses and provides 272.8million litres of water per day, against a demand for 409.2million litres per day in 2003. In July 2002, the Cabinet approved a revised National Water Policy (NAWAPO), ending a three year development process. The four key issues in the revised policy are: [1] demand responsive approach (DRA) principle leading to community ownership and management (COM) of water/sanitation facilities; [2] private sector participation (PSP); [3] integration of water supply and sanitation and; [4] decentralisation of service delivery from Central Government to district councils. Germany and the European Union are currently providing US$51 million to provide safe drinking water to one million water users in Mwanza, Iringa and Mbeya.


Services in Dar es Salaam The city consumes at least 60million gallons per day whereas the Dar es Salaam Water and Sewerage Authority (DAWASA) supply capacity is less than 6million gallons daily. Currently, approximately 80% of the urban poor in Tanzania lack water and sewerage services because of chronic underfunding. In Dar es Salaam 35% of the population have inadequate water supply and 45% have inadequate sanitation. Only 5-10% of the households have sewerage. DAWASA, which was privatised in 2003, can only supply 10% of the daily required water capacity. At present over 40% of water is unaccounted for and with 98,000 connections, only 20% of Dar es Salaam's three million inhabitants have a sewerage connection. Dar es Salaam has the oldest sewage system in the country. 27% of the population who l ive in high density urban sectors use pit latrines which are in typically in a poor state of repair. The majority of the waste collected in the sewage system is channelled to an ocean outfall without treatment. The Government has attempted to treat part of the waste through waste stabilisation ponds. Nine of these ponds have been set up in Dar es Salaam and several others in small municipalities. The ponds are capable of removing up to 70% of the BOD, leaving the water with a reasonable dissolved oxygen level. These are at best an interim measure, but better than no treatment.


Rural scarcity remains the norm Much of Tanzania is characterised by extreme aridity and the need for water for basic agricultural development. The country has been largely dependent on international finance and aid agencies. For example, between 1983 and 1994, WaterAid, the UK water and sanitation charity provided potable water supply infrastructure to

TANZANIA PART 2: COUNTRY ANALYSIS


approximately 630,000 people. It is of interest to note that WaterAid found that villagers were willing to exchange 10-15% of their household cash income for water from these projects. The Tanzanian Government seeks to have all rural households within 400 metres of a reliable source of potable water, although there are no firm timetables for this target as yet. After independence in 1961, Government policies in the water sector attempted to redress the urban-rural imbalances in water development. In 1971, the government launched a twenty-year rural water supply programme to provide the rural population with a clean, safe, and adequate water supply within 400m of each house. A review of the water programme by the Ministry of Water in the early 1980s, revealed that only 42% of the anticipated 89% coverage had been attained in the rural areas. Furthermore, it was noted that as a result of government's emphasis on rural water supply, the urban water supply and sewerage situation had seriously deteriorated.


New approaches to rural needs In 1999 it was announced that after a series of field trials, WorldWater Corp. of the USA was to provide up to US$30 million of solar water pumps to the Tanzanian Ministry of Water and the Drilling and Dam Construction Agency. These pumps have a capacity of 5-2,000 gallons per minute and can be used for potable water and irrigation in rural areas.

Groundwater Annual availability (1998) 30.0km 3 Per capita 932m 3

MAJOR CITIES City 2000 2015 Status Dar es Salaam 2,115,000 4,080,000 Some O&M outsourcing

Urban services are being privatised The Government’s divestiture programme in 1993 concentrated on the privatisation of commercial enterprises, the majority of which were planned for completion during the first five year period. By 1998, the Government's privatisation programme had resulted in the sale of nearly half of the state owned enterprises. In June 1996, policies affecting the National Urban Water Authority (NUWA)/Dar es Salaam Water and Sewerage Authority (DAWASA) were changed to allow encourage cost recovery and the Dar es Salaam Water and Sewerage Authority (Dawasa) Act, was enacted in 2003 as part of the Government's economic liberalisation programme to enable PSP. In consequence, the Parastatal Sector Reform Commission (PSRC) awarded a 10 year O&M contract for the water and sewerage services in Dar es Salaam to Cascal (Biwater/Nuon) JV. The US$161 million project is being co-financed by the African Development Bank (US$48 million), the European Development Bank (US$37 million), DAWASA (US$12.5 million), the World Bank (US$55 million) and City Water (US$8.5 million). Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Dar es Salaam 10 year water & sewerage O&M Cascal A 30% price increase and a two-tier billing system aimed at keeping the price of water low for the poor has resulted in increased prices for the poor who do not have individual connections and have to buy water from vendors who will pass down the price increases. By 2007-08, developing more community water points will reduce the price for most of the city residents. Private sector company operations (Please see the relevant company entry for details)


Cascal Biwater (UK)/Nuon (Netherlands) 3,000,000 3,000,000 3,000,000

THAILAND PART 2: COUNTRY ANALYSIS


THAILAND Thailand has both encouraged the development of home-grown water companies and the use of international management for its water and sewerage services. Thailand’s East Water has performed strongly given the domestic climate. A comprehensive privatisation programme has been under development since 2000 and may well emerge during 2005.


Government departments and law Thailand’s first environmental law, The Enhancement and Conservation of National Environmental Quality Act was passed in 1975, creating the National Environment Board (NEB) and the Office of National Environment Board (ONEB). This act was amended twice in 1978 and 1979, transferring the supervision of the Office to the Ministry of Science, Technology and Energy. These acts had limited effect and in 1992 the 'Enhancement and Conservation of National Environmental Quality Act' (NEQA) of 1992 (B.E. 2535) was passed. This new law created three environmental organisations: the Office of Environmental Policy and Planning (OEPP), the Pollution Control Department (PCD) and the Department of Environmental Quality Promotion (DEQP). These three organisations are mandated to promote the effective implementation of policies, plans and strategies at both national and local levels as well as the enforcement of laws and regulations. In consequence, the Ministry of Science, Technology and Energy changed its name to the Ministry of Science, Technology and Environment (MOSTE). Water policy is enforced by MOSTE, which includes the Wastewater Management Authority and the Department of Environmental Quality Promotion and the Pollution Control Department.


Management Water is managed through the Metropolitan Waterworks Authority (MWA, for Bangkok) and the Provincial Waterworks Authority (PWA, for the rest of Thailand). Water services

2001 Produced Sold(m m3/day) Connections (million) MWA 1,415 857 1.45 PWA 704 474 3.0

US$700 million is to be spent linking three rivers in eastern Thailand to provide 504million m3 of water by 2006 and 647million m3 by 2016, compared with current resources of 300million m3 a day. In addition, the PWA seeks to upgrade 230 water treatment works for bht 35 billion (US$945 million).

Urban Services Safe Drinking water 94% L per capita per day 172 Access to sewerage 98% % Sewage treated 5%

Water provision and pollution The MWA served 4.5million people in Bangkok in 1991, with 79% of the city area covered. In 2001, the MWA served 6million people, or 75% of the population within its coverage area. Poor water treatment facilities mean that water has to be boiled or filtered before use and 20% of the population use bottled water instead. 31% of water is lost due to leakage. The PWA served 3.7million people in 1991, rising to 10million by 2001. Rural water provision remains a problem, with widespread seasonal scarcity. Water shortages affected 1,369,437 families, or 6,350,356 people, in 364 districts of 44 provinces in early 1999, according to the interior ministry. This compared with shortages affecting 228,664 families or 945,425 people in 300 districts of 42 provinces in 1998.



In 1998, the Pollution Control Department found water quality in 33% of major rivers to be polluted, while 18% were in good condition.


Privatisation plans In July 1998, the Government announced that the PWA would launch 12 major water privatisation projects for bulk water supply, water treatment and water distribution in 10 provinces in the medium term and that further concessions for Bangkok are to be awarded. This project started in mid 1999, with the corporatisation of the PWA starting in 2000. Water competition for industrial customers was introduced in 2001, with five concessions from PWA gained by East Water’s Universal Utilities.


Companies noted East Water (EW) remains the only private sector company entirely devoted to water activities. In addition to its current network expansion plans, the company seeks to be involved in the new privatisation programme and is concentrating on gaining concessions in Bangkok. In 2000, it acquired Electricity Generating Pcl’s 70% stake in Egcom Tara, a privately held water supply company. EW also has an industrial water JV with VE. Thames Water’s water provision contract to northern Bangkok was extended in 1995 to cover additional water management operations.

MAJOR CITIES Population 2000 2015 Status Bangkok 7,372,000 9,816,000 Partly privatised

Privatisation moves unsteadily forward In July 2000, the State Enterprises Policy Committee (SEPC) rejected an application for a direct supplies concession for Thames Water and prohibited the Provincial Waterworks Authority (PWA) from offering any new private deals until the completion of a World Bank-sponsored review. The SEPC ordered the PWA to change its service concessions with Thames into turnkey construction contracts. Factories were not linked up to the privatised systems because they continued to use cheaper water from artesian wells. The PWA had already been forced to pay a private operator BHT118 million (€3.3 million) compensation because of the resulting under-utilisation of the available capacity. The PWA has introduced a new method of calculating water bills by the end of the year to better reflect actual costs. PWA hopes the price increases will reduce the losses incurred from subsidising industrial water consumption and pave the way for eventual privatisation. The authority also plans a nation-wide overhaul of water systems to reduce unaccounted for water levels from the current 35.6% to 25%. In 2004, it was announced that the Government was considering an IPO of the MWA which in turn would be linked with one or more strategic partners. The PWA will meanwhile be split into four regional entities. The PWA privatisation is worth an estimated US$1 billion. The MWA will be split into West and East Bangkok zones, which generated combined revenues of US$385 million in 2002.


Water Sewerage Total Egcom Tara East Water (Thailand) N/A 0 N/A East Water East Water (Thailand) N/A 0 N/A Pathum Thani RWE (Germany) 800,000 0 800,000 Bangkok RWE (Germany) 400,000 0 400,000 VE VE (France) N/A 0 N/A



Paying for sewerage Domestic and business customers were charged for wastewater treatment for the first time in 2003, via a service fee. The rate was set by the Drainage and Sewerage Department: THB2 (€0.04) per m3 of water for household use, THB4 (€0.08) for hospitals, markets, department stores and hotels, and THB8 (€0.16) for industrial use. Households, state agencies and state enterprises would not pay the fee for the first 10m3 of water each month. The cost per household was estimated at THB60 (€1.23) a month for treatment. The fee will be phased in over three years to minimise this, starting with THB1 (€0.02) per m 3 for households in the first year.

Listed water & sewerage service companies (Please see company section for details) Company Activities Region Eastern Water Water distribution concession Eastern seaboard

Corporate malpractice concerns The US$750 million Samut Prakarn wastewater management project has been put on hold due to concerns about the lack of transparency. Concern has been raised about the emphasis on post hoc effluent treatment rather then concentrating on sources of industrial pollution. At the same time, the consultation process failed to meet with the Asian Development Bank’s guidelines for good practice, while the operators were unable to demonstrate suitable technical capabilities.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Bangkok 30 year BOT, water distribution RWE East seaboard Water provision to seven provinces Eastern Water Lampang THB800 million water supply project Eastern Water/VE North Bangkok Water management Pathum Thani Ratcharburi THB690 million water supply project Eastern Water

Source: Brown, S. (2002). Asia Water 18 (3) p 9-13.

TRINIDAD & TOBAGO PART 2: COUNTRY ANALYSIS


TRINIDAD and TOBAGO The Trinidad and Tobago Management Contract The Water and Sewerage Authority of Trinidad and Tobago (WASA), provides water and sewerage services to the island’s 1.27million people. In 1996, piped water was available for less than twelve hours a day, distribution losses were about 50% and 1% of the 240,000 customers were metered. The sewerage system served only 30% of the population. Until the mid-1980s, the government had not raised rates for fifty years and by the end of 1992, it had accumulated losses of US$800 million. In 1994 the Government decided to adopt a phased privatisation strategy for the service. Since developing a concession would take too much time in the run up to the 1995 general elections, a two-phase strategy was adopted. In the first phase, WASA would contract a private operator to provide a management team to meet operational, maintenance, and investment targets and follow an agreed business plan over the term of the agreement. A management contract was chosen because of the poor quality of operational information available, undeveloped institutional arrangements and the potential for slow legislative change. Management contracts were seen to be the most flexible way of allowing the authorities to gain hands on experience of private sector contracts in the sector. During the five years of this contract, a concession contract would be developed. The contract covering water supply, sewerage and sewage treatment and disposal was awarded in 1996 to a JV between Severn Trent, WASA and the Government of Trinidad and Tobago. The contract allowed for Severn Trent to negotiate a follow-on contract within a specified time limit after which it becomes open to all. The process was supported by a US$80 million loan from the World Bank, designed to assist the development of conditions suitable for private sector participation. WASA increased tariffs by 35% for customers receiving water for more than twelve hours a day so as to encourage the private sector operator to expand coverage and ensure a reliable service. The tariff increase was introduced in 1995. This timing was meant to separate the two events, to ensure that the politics of the increase would not sour the arrival of the new operator in the eyes of the public. The contract has been seen as politically contentious during its five year life, not least because there was a certain comfort to be found in providing a cheap but substandard service. The contract ended in April 1999. In 2003, the Inter-American Development Bank supported a proposal for a 25 year concession for water and sewerage services. The contract award process has yet to be started. It is understood that this will involve a an operating company with 60% of its equity being locally owned, 30% by an international company and 10% by Government employees.

TUNISIA PART 2: COUNTRY ANALYSIS


TUNISIA Water provision All households in urban areas are connected to the mains for potable water, along with a 65% connection rate in rural areas. The latter was meant to increase to 77% by 2000. The average household usage is 100L per day. Distribution losses in 1993 were 34% (280 million m3 of water distributed and 209 million m3 billed for). There was a reduction in leakage of 28% in 1996. Deep boreholes account for 45% of drinking water. Current groundwater resources are expected to be used up by 2010, but new sources are being developed. Water resources

Million m3, 1996 Surface water Deep underground Groundwater Resources 2,700 1,210 719 Usage Irrigation 754 730 745 Drinking 200 165 0 Industry 0 85 0 Total 954 980 745

Sewerage and sewage treatment The 8th Plan (1991-96), a national spending plan), saw 25 towns connected to the sewerage network with 111 towns covered in total. 660,000 households with 4.6million people are connected to the sewerage network, which is an urban connection rate of 77%. 199 towns will be connected to the sewerage network by 2011, with current sanitation plans for 160 towns. There are also plans to separate stormwater flows from sewage effluent in the country’s earl ier systems. Secondary treatment is being used wherever it is possible. There were 50 sewage treatment works in operation in 1996, treating 120million m3 of water with 30million m3 recycled for irrigation and 8million m 3 for amenity gardens. Sewage treatment development

Million m3 pa Plants Capacity Treated 1995 48 135 111 1996 50 140 120 2001 66 175 155 2006 83 185 165

Privatisation projects and prospects The Tunis West Water Treatment Project is designed to promote the participation of the private sector in the management and financing of the country’s infrastructure. The project involves the construction of a new water treatment facility with a capacity to serve 1.4million people by the 2023 target date. The European Investment Bank lent Tunisia €50 million for encouraging the privatisation of businesses and utilities in December 1998. The Tunis West wastewater treatment plant proposal, serving 0.7-1.0million people is to be developed for US$100 million via a 25 year BOT concession remains under consideration six years after it was originally proposed in 1998. Meanwhile, two WWTWs in Tunis are to be expanded: The Choutrana plant's capacity will be raised from 110,000m 3 per day to 150,000m 3 per day, with 40,000m 3 per day of capacity being be added to the existing 80,000m 3 per day Sud Meliane plant. To meet demand by 2006, a further 100,000m 3 per day of capacity is required.

TURKEY PART 2: COUNTRY ANALYSIS


TURKEY The deaths as a result of the Izmit earthquake in 1999 were a stark reminder that as far as infrastructure is concerned, the quality of the plant installed can matter as much as its quantity. The dam built by RWE /Thames Water was unaffected, having been designed with earthquakes in mind. International construction companies are likely to find favour in the medium term as service rehabilitation and extension gets underway.



Water shortages in recent years have become a widespread problem that has been exacerbated by rapid urbanisation. Privatisation Turkey was one of the pioneers in the use of BOT contracts in the developing economies during the early 1980s. There is a high level of public support for privatisation, but political opposition and legal problems remain. Turkish courts are responsible for the operation of BOT concessions whereby the courts have to clear each project and all objections to them. This makes life difficult for international finance, whereby some form of independent international arbitration would be more attractive. It is widely expected that water privatisations will take place in the medium term. In this sense, Izmit (bulk water provision) and Antalya (O&M, water and sewerage) are groundbreaking contracts.

Urban services Safe drinking water 91% Access to sewerage 84% % Sewage treated 5%


1985 1990 1995 Tertiary 0.0% 0.0% 0.0% Secondary 0.1% 0.6% 3.6% Primary 0.0% 7.2% 8.5% Sewerage only N/A N/A 50.4% Not connected N/A N/A 37.5%

International players noted Suez and Thames Water have a major presence in the country, while United Utilities/Bechtel and SAUR were involved in the bidding for Antalya. Spending plans The Istanbul Water and Sewerage Administration (ISKI) allocated US$450 million for infrastructure projects in 2003, with am emphasis on sewerage and sewage treatm ent.


TURKEY PART 2: COUNTRY ANALYSIS


Izmit Izmit had a troubled start because of the Turkish BOT award system delaying the start of the contract implementation process for nearly two years. Since then, the three year construction phase has been completed and in 1999, the contract entered its 15 year operational phase. A reservoir supplies water to Izmit, the surrounding towns and villages and to Istanbul. The project involved 100km of pipeline being built, connecting the reservoir to the city of Izmit. The reservoir has a capacity of 60billion litres with an annual yield of 142billion litres. The water treatment works is 5km downstream from the reservoir, and has a capacity of 480million litres per day. The treatment facilities cost US$100 million to build. The project was 85% debt and 15% equity financed. US$140 million of equity finance was provided by Thames Water (UK, 35%), Mitsui (Japan, 7.5%), Sumitomo (Japan, 7.5%), Gama (Turkey, 23%), Guris (Turkey, 12%) and the remaining 15% by the Izmit municipality. These investments are reflected in their respective holdings in Izmit Su As, the operating company. US$803 million of debt finance was arranged. The principal components were: US$236 million Export Credit Guarantee Department (ECGD) supported credit loan arranged by Nat West (UK), US$167 million Turkish commercial loan, US$180 million COFACE buyer credit loan, US$40 million Japanese commercial loan and US$180 million JEXIM credit loan.


MAJOR CITIES Population 2000 2015 Status Istanbul 8,953,000 11,362,000 Partial privatisation of bulk water Ankara 3,155,000 3,778,000 N/A Izmir 2,214,000 2,704,000 Privatisation under consideration Bursa 1,166,000 1,551,000 Privatisation under consideration Adana 1,091,000 1,288,000 N/A Gaziantep 757,000 933,000 N/A

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Antalya 10 year O&M for water and sewerage ANTSU Izmit 15 year concession, bulk water Izmit Su SA


Water Sewerage Total ANTSU Suez (France) 535,000 535,000 535,000 Izmit Su As RWE (Germany) 1,200,000 0 1,200,000

UGANDA PART 2: COUNTRY ANALYSIS


UGANDA The main concern in Uganda is to continue the sectoral and service delivery reforms of the past two years. If these can be used to develop the basis of a commercially viable water and sewerage service for urban areas, private sector participation may be invited in the medium term.


Nationally, Uganda seeks to have 100% urban water coverage by 2010 and for rural areas by 2015. The government believes that it can attain these targets, having reached 60.3% urban and 49.8% rural coverage in 1999-00. 83% of the population use pit latrines, but in rural areas access to safe sanitation is restricted to 51% of the population. The NWSC The National Water and Sewerage Corporation (NWSC) are responsible for water provision to Uganda’s main urban areas. It was formed in 1972, for the provision of urban water and sewerage services. Having started off in Kampala, Jinja and Entebbe, NWSC has extended its services to cover Masaka, Mbarara, Fort Portal, Kasese, Lira, Gulu, Tororo and Mbale. Water and sanitation service provision in rural areas, and smaller urban centres is run by the Government’s Directorate of Water Development, which also oversees the overall management of Uganda’s water resources. Under the President, Idi Amin, water was regarded as free for all Ugandans. There were no formal measures to recover water fees until 1987, nor an effective charging system. NWSC therefore relied on government subsidies, which in most cases have been inadequate. In consequence, operation and maintenance work and capital spending have been minimal except where directly supported by donor agencies. The water supply systems in the urban centres operated at less than 10% of capacity, providing services for about two hours a day, by 1985. Subscribers thus had to purchase untreated water from vendors.


Commercialising the NWSC In 1987, the Ugandan Government liberalised the economy. The NWSC was expected to strengthen measures for cost recovery, and become fully self-financing in its operations. With international credit guaranteed by the Government (but lent to NWSC at commercial interest rates), NWSC rehabilitated water and sewerage systems in nine major towns. Kampala had its water treatment works capacity expanded to meet the demand up to 1998. By 1997, service coverage in the area served by NWSC had improved to about 50%. In Kampala, an attempt had been made to improve revenue collection by privatising that department in late 1997. H.P Gauff, a German firm, was contracted to manage the Kampala Revenue Improvement Project (KRIP), but KRIP has been hampered by lack of administrative support. Paid for water increased from 3-5% in the mid-eighties to 30% in 1993 and levelled off at 40% for the next three years. The collection of bills ranged between 60% and 100%. In consequence, since 1993, arrears have built up by an average of some USh5 billion pa. Revenues increased from USh5.5 billion in 1992 to USh21.5 billion in 1996 and operational expenditure rose from USh5.0 billion to USh19.5 billion, with NWSC attaining an operating profit in three of those five years. These were interim measures, since they did not take into account the NWSC’s debt, which, is charged at the full rate of interest.




Reforming the NWSC In 1998, NWSC lost USh4,200 million, due to the cost of servicing its accumulated debt. The NWSC has seen seven phased performance enhancement programmes since William Muhairwe took over as Managing Director in November 1998. Reform programme

Programme Duration 100 Days Feb 1999 – May 1999 SEREP I Aug 1999 – Jan 2000 SEREP II Mar 2000 – Aug 2000 Area Performance I Sep 2000 – Sep 2001 Area Performance II Dec 2001 – Nov 2002 Service Support I Dec 2000 – Sep 2001 Service Support II Jan 2001 – Nov 2002

Ndombolo ya Solo, the initial improvement programme addresses five areas: Bulk water and sewerage services, water distribution, revenues, cost reduction and customer care. Programme implementation

1997 1999 2001 UFW* – Kampala 60% 53% 39% UFW* – others 44% 37% 28% Meter coverage 70% 80% 89% Connections pa 4,560 5,052 6,840 Debt age (days) 414 451 278 Staff/1000 connections 40 22 13 Water connections 47,412 53,824 65,021 Break even rate 3/12 5/12 10/12

* - Unaccounted for water Tariffs have not increased since 1994. It was found that for cost recovery (including debt), a 135% price rise would be needed. Instead, an indexing component was introduced in April 2002, linked with expanding coverage. NWSC profits rose by 60%, from USh4.3 billion ($2.5 million) in 2001 to USh6.9 billion ($4 million) in 2002, on the basis of increased water demand and network efficiency work. Water consumption rose by 4.8% in 2002. According to NWSC, water losses through leakage and illegal connections have fallen from 60% in 1998 to an average of 39% in the country as a whole, and 28% in Kampala in 2002. The National Water and Sewerage Corporation (NW&SC) has increased water tariffs by 10%, from UG$10 (€0.0048) to UG$11 (€0.0053) per jerrycan (20L) in order to extend standpipes to customers. Water kiosk owners have been selling a 20-litre jerrycan of water at UG$100 (€0.048). Customers within 50m from the NW&SC main water pipe will be connected free of charge and paying their water bills directly to the corporation.


Long term plans The Minister for Water, Lands and Environment stated in August 2000 that the government plans to provide safe water and sanitation facilities to all Ugandans by 2015. In 2002, 40% of the population had access to safe water and 30% had access to adequate sanitation. 60-65% of the urban population has access to water services and 10% is connected to sewerage networks. Privatisation prospects Private sector involvement is in line with the NWSC statute, No 7 of 1995. The NWSC and politicians support some degree of privatisation and the current state of legislation is regarded as being adequate to take this forward. There have been some pilot projects using the private sector for community management in Jinja and Njeru and private sector involvement in arrears collection. The World Bank and the ODA have been involved with the NWSC in the development of proposals for the contracting out of water and sanitation services. The Public Enterprises Reform and Divestiture (PERD) Statute No.9 of 1993 seeks to reform and divest public enterprises,



with asset sales typically linked to a market listing. To date, the NWSC has yet to be formally included in the asset sale process. In 2000, the World Bank loaned Uganda US$48.5 million for the Privatisation and Utility Sector Reform Project. This project is designed to improve the efficiency of utility operations, while encouraging the privatisation of them where appropriate. In January 2002, Ondeo was awarded an O&M contract for various O&M services in Kampala. The contract seeks to reduce losses and waste from the water distribution system, extend water metering, improve the customer data base, billing system and operate the water supply and sewerage systems in Kampala on an efficient and cost effective basis. This contract is viewed as a trial for greater PSP. The current proposal is for a lease contract of around ten years for towns in the NWSC service area. Service coverage of the company’s water supply system has improved from 50% in 1998/99 to 60% in 2001/02. Total water production currently stands at an average of 130,000m 3/day up from 85,000m 3/day in 1998. Eight private water operators responsible for water supply in 25 urban centres in Uganda have formed the Association of Private Water Operators in Uganda (APWO-Uganda) in 2003. These urban centres are small towns with populations between 5,000 and 15,000. Kampala pullout for Suez Ondeo Suez carried out a two year management contract with NWSC between 2002 and 2004, but decided not to seek to renew it when it expired in February 2004.


Sources: H.O. Onek & S.M. Kayaga (1997). Water utilities research: NWSC, Uganda. 23rd WEDC Conference Durban, South Africa, 1997. W T Muhairwe (2002). Strategies and challenges of improving water and sanitation service delivery – a case of National Water and Sewerage Corporation, Uganda. Water 21, Africa Energy Forum, London, July 2002.

UKRAINE PART 2: COUNTRY ANALYSIS


UKRAINE It is tempting to regard Chernobyl as one of the lesser problems facing the Ukraine. Financial instability and a decrepit and badly managed water provision infrastructure do not make an attractive proposition when seeking to modernise the Ukraine economy. The introduction of private sector and international finance for water and sewerage projects remains at an early stage. Water consumption In 1994 28.6billion m³ of water was abstracted from inland water bodies for household and industrial use. Compared with 1990, water intake has fallen by 18%, with no change from 1993. Water extraction from ground water sources reached 4.6billion m³, 26% less than in 1990. The volume of recycled and secondary water used was 53.4billion m³, equivalent to 83.9% of overall demand for industrial purposes. Water resources and use

1988-1994, million m³ 1988 1990 1992 1994 Total 27,459.54 29,083.31 25,895.0 22,575.0 Groundwater 4,142.05 4,168.6 3,963.53 3,499.0 Industry 13,536.6 14,060.291 1,508.86 9,528.0 Agriculture 9,914.87 10,892.1 10,267.99 8,999.0 Household and municipal 3,727.28 3,680.67 3,696.64 3,822.0

Discharges of wastewater and contaminants In 1994 15,028million m³ of waste water were discharged, including 4,873million m³ (32.4%) of contaminated water and 1,053million m³ (7.0%) of untreated wastewater. Wastewater discharges have declined by 27% since 1990, while discharges of contaminated wastewater increased by 35% as compared to 1990. Household and municipal utilities accounted for 48% of contaminated water, and 16% of untreated wastewater, with industry accounting for 46% and 57% respectively and agriculture accounting for the remainder. Contaminated water discharges

1988-1994, million m³ 1988 1990 1992 1994 Industrial discharges 1,350.81 1,533.18 2,363.18 2,223.4 Untreated 403.39 318.32 718.03 601.4 Agriculture discharges 19.93 64.19 110.48 290.58 Untreated 18.0 458.7 102.31 284.3 Household and municipal 1,287.79 1,573.15 1,506.13 2,346.7 Untreated 93.28 91.52 128.06 166.7

Effluent treatment The total capacity of wastewater treatment facilities was estimated in 1995 to be 8,775million m³ pa, including the capacity of installations that discharge wastewater directly to the inland water bodies (8,289million m³).

Treatment capacity in 1994 million m³ pa Tertiary 23 Secondary 1,782 Primary 207

The total input into these installations was 5,895 million m³ of wastewater. The capacity of wastewater treatment facilities increased by 641million m³ from 1993 to 1994 and by 644million m³ pa between 1990 and 1993. In 2002, the Helsinki Commission (Helcom) noted that municipal and industrial wastewater treatment at the city of Lvov needs to be improved urgently. The sewerage network is in poor condition and needs renovation to avoid groundwater pollution. A US$40 million project (€40.5 million) is expected to start in the near future and will focus on the city’s discharges. The Dnieper river basin The Dnieper basin is the major source of fresh water in the Ukraine. Only 45% of the wastewater discharged into the Dnipro River, is treated, yet this river’s surface and underground resources supply water to two-thirds of the Ukrainian population. In 1994, 17.3km³ of water was extracted from the Dnipro basin within Ukrainian territory. The basin received 7.9km³ of wastewater discharges, including more than 2km³ of contaminated wastewater and 375million m³ of untreated sewage effluent. Discharges of contaminated wastewater were 500million m³ higher than in 1993, although some contaminants were lower or at the same level as in the previous year.

UKRAINE PART 2: COUNTRY ANALYSIS


Drinking water quality Water supply to the Ukrainian population has been declining from year to year, due to the lack of an integrated system of water supply management. The capacity and effectiveness of water treatment facilities cannot meet the increasing demand for wastewater treatment. In 1994 5.9% of piped water did not meet hygiene standards (2% more than in 1993), with 10.3% of communal water supplies (1.8% more than in 1993) and 6.4% of water pipes belonging to other bodies (1.4% less than in 1993) also failing. Only 3.7million people in rural areas enjoy guaranteed water supplies for household and drinking purposes, equivalent to 24% of the total rural population of 15.7million. By 2000, 12.5% of water supplies were failing drinking water quality standards and half of the villages with piped water were being served through failing systems. Private sector responses The first international loan for a water or wastewater project did not take place until May 1999. The EBRD has lent €26.5 million to Zaporizhzhia Vodokanal, the water and sewerage entity serving the city of Zaporizhzhia’s 500,000 people. The loan is being used to upgrade the city’s water and sewage treatment works to improve the quality of the city’s drinking water and to ease discharges into the Dnieper basin. The city was selected because it charges for its services on a cost recovery basis and is financially self-sufficient. The city of Lviv gained a US$6 million loan from the Swedish Government in 2003 for the refurbishment of its water supply and wastewater systems. The total cost of the project is US$40.8 million.

UNITED ARAB EMIRATES PART 2: COUNTRY ANALYSIS


UNITED ARAB EMIRATES The individual Emirates have experienced an increase in water demand of 10 to 40 times since 1970. Water demand for Abu Dhabi was 683million m3 in 2003 and is forecast to rise to 1,140million m3 by 2015 and overall water consumption in the UAE is expected to increase by 44% to 3.2billion m3 by 2025 2015. Part of the water shortfall for agriculture and municipal gardens is to be met through a comprehensive programme of sewage treatment and effluent recovery. The UAE is planning for the construction of 120 desalination plants at a cost of US$1,800 million. Privatisation in various forms is taking place All the major combined power and desalination projects currently under development have a significant degree of private sector involvement. The emphasis has been shifting towards the private sector management of water and sewerage services. The UAE continues to seek ways of making privatisation play a positive role, by attracting international investors and reducing its budget burden. Bidders will need to emphasise technology transfer and training. The UAE envisages the positive use of water meters, cuts in subsidies and ending subsidies for expatriates. Water is currently sold at 25% below its cost price. Ajman is the pioneering Emirate The Emirate of Ajman has been one of the privatisation pace setters in the Gulf. KEOIC (Kuwait) and Black & Veatch (USA) were originally awarded a concession for all sewerage services and tertiary wastewater treatment in the Emirate of Ajman in 1996. The concession was delayed for five years before construction started in 2001 by United Utilities and was completed in 2003. Operations started in 2003, with Thames Water and Sharjah’s Metito (Overseas) being awarded a 27.5 year operation and maintenance contract. Capital spending of US$140 million was needed for the first phase, with revenues expected to be US$450 million over the BOT’s life. The system is designed to have a PE of 350,000, or 150,000 people connecting 45,000 properties. Costs are to be recouped via the charging of households and the resale of recovered water. The first phase will serve 45,000 properties. Al Taweelah desalination facility Water demand for Abu Dhabi was at 210million gallons per day in 1990. It is forecast that the peak demand will be 500million gallons per day by 2010. Water demand is growing by 10% pa. Thus US$250 million in capital spending for desalination and new resources is being mobilised between 1990 and 2010. 60-70% of water is currently provided by desalination and it is expected that this will rise to 80% by 2005. In Abu Dhabi, the Al Taweelah A-1 extension will generate 40-50million gallons of water a day and its management is to be privatised. Al Taweelah A-2 will then be built for 2001 at a cost of US$700 million. Al Taweelah A-2, will be constructed on the coast of the Arabian Gulf north-east of Abu Dhabi. The facility will have a water desalination facility capable of producing 50-76million gallons of water per day. Al Taweelh project stages: Taweelah 72 million gallons per day currently available Taweelah A-1 expansion 40-50 million gallons per day from 1999 Taweelah A-2 50-76 million gallons per day from 2001 Taweelah A-3 70 million gallons per day by 2010 Sewage treatment works projects All of the Emirates are considering the installation of comprehensive sewerage networks and sewage treatment works so as to optimise the retention of effluents. In Abu Dhabi, the 1982 Mafraq sewage treatment works served 330,000 people. It was upgraded to handle 210,000m 3 per day by the end of 1999 and 260,000m 3 by 2001. Sharajah’s Al-Awir sewage treatment works underwent an expansion from 260 to 520m 3 per day at a cost of US$54 million in 1997.

UNITED KINGDOM PART 2: COUNTRY ANALYSIS


UNITED KINGDOM With an identifiable private sector presence since 1619, it is not surprising to see the UK at the head of market developments. The Private Finance Initiative has been used to encourage competition for the development and management of specific projects and facilities, while competition through inset appointments is (in theory) being used to mobilise otherwise neglected secondary water sources. The regulatory climate in England and Wales has moved on since 1999, but the sell off of British water companies is perhaps not what was intended when people refer to the sector’s internationalisation.


Regulatory environment Water and sewerage in England and Wales is governed by the need to comply with UK national and EU environmental law and international conventions, along with providing the highest standard of customer service and value and by the principle that utilities should not exploit their monopoly position. Companies are subject to regulation from three principal bodies; The Office of Water Services (Ofwat) is the Government appointed regulator for the privatised water utilities in England and Wales. Set up in 1989, its role is to ensure that all the private sector water companies provide good value for money in terms of services provided along with meeting specified water quality and certain environmental compliance targets. The Drinking Water Inspectorate (DWI) was established in 1990 by the Government to monitor the quality of water after it had been treated and at various stages of its distribution process. Its role is to ensure that potable drinking water is provided by the water service companies, and that it complies with Government, EU and World Health Organisation (WHO) standards. In 2003, 99.9% of the 2.8million samples taken by the DWI complied with these standards. The Environment Agencies (England, Wales, Scotland and Northern Ireland) were established in 1995 to take over monitoring the quality, availability and use of all non-tidal waters in England and Wales, along with designated bathing areas. Since 1990, the EA has been markedly more aggressive towards polluters, regularly taking transgressors, including the water companies, to court. In 1992, the EA became increasingly concerned about over-abstraction of water from rivers and groundwater, and is advocating stricter water conservation strategies.



1990 2000 Tertiary 13% 28% Secondary 62% 64% Primary 8% 2% Connected 84% 94%

Inland water quality The quality of inland waters has improved since 1990, as spending has increased on sewage treatment since the sector was privatised in 1989. The improvement in quality chiefly stems from setting mandatory targets for sewage treatment works performance, rather than the expansion of the sewage treatment infrastructure itself. The latter has made itself felt from 2000.



Inland water quality (2001)

Category 1994-96 2001 RE1 / A Very Good 27.1% 31.0% RE2 / B Good 31.5% 35.2% RE3 / C Fair 21.2% 18.0% RE4 / D Fair 10.3% 8.2% RE5 / E Poor 8.8% 6.9% Worse / F Bad 1.0% 0.4%

Inland waters in the UK are regarded as Europe's cleanest. This reflects the favourable geomorphology whereby short, fast flowing rivers discharge into the sea without the potential for pollution build-ups seen in longer rivers such as in Germany or France. Between 1990 and 1998 there was a net improvement in water quality in 25% of the monitored length of rivers and canals in England and Wales. Competition Since 1998, there have been three announcements by the Government and Ofwat allowing greater degrees of direct competition for the provision of water and sewerage services to industrial users. In 1998, users of more than 250Ml pa were opened to competition. In 2000 this was extended to users of 100-249Ml pa and in 2002 to all users of more than 50Ml pa. The industrial and commercial water market in England and Wales is worth £1.65 billion, of which, £1.26 billion is accessible to competition under current conditions via inset appointments and common carriage agreements. The on site treatment of dilute industrial wastes is also open to competition, but this is a separate market with its own specialist players. Competition for industrial water is developing slowly in England and Wales and it has become a reactive process whereby water tariffs are renegotiated to head off the threat of losing a large customer. This has led to a ‘water broking’ market developing where companies seek to gain such contracts on behalf of a client and in turn gain a percentage of the savings. The England and Wales major user market by client size

Market segment Customers Water Sewerage Sources 50-99 Ml pa 1,900 £200 million £220 million Ofwat, 2002/Author 100-250 Ml pa 1,500 £300 million £330 million Author/Author <250 Ml pa 500 £100 million £110 million DETR, 2000/Author Total 3,900 £600 million £760 million

To date nine awards have been made, all of which were based upon licence variations, with the exception of Albion Water’s (Enviro-Logic) Shotton Paper contract, where a new licence was granted, to mobilise a new source of water for the facility. Enviro-Logic advised Ofwat in 2000 that it was pursuing new 200 opportunities, while Awg was pursuing 55 at the time. Enviro-Logic stated that a total of 18 applications were at the discussion stage with Ofwat in April 2002. No further progress has been noted. AWG's Hartlepool Water is to supply water to a new industrial complex at Wynyard Park in Teeside. This is in place of Northumbrian Water, with customers being charged the same tariff as Hartlepool Water's existing customers, which is lower than Northumbrian Water's. AWG has also gained a service contract for RAF Finningley near Doncaster, which was previously served by the Ministry of Defence. This is within the service areas of Yorkshire Water (Kelda Group Plc). AWG has also gained the water provision contract from Essex and Suffolk Water Plc (Suez) to Buxted Chickens. Hartlepool was acquired by AWG in order to boost AWG’s presence in the region. Thames Water gained the PFI contract for water supply and sewerage upgrade for Tidworth Garrison against Southern and Wessex. The garrison serves water and sewerage to 11,000 people, 75% being service personnel and their dependants. The inset appointment is for a minimum period of 20 years. Thames will spend £3 million in upgrading the current system and will be paid £640,000 pa for 20 years (£12.8 million in total). The Ministry of Defence’s Project Aquatrine is also using the PFI scheme for three 25 year regional water and sewerage contracts serving 3,000 bases with a total capex of £1.1 billion. The first award was in June 2003 to Brey Utilities (Earth Tech & Kelda), worth £1 billion in revenues. Total contract value will be £2.9 billion.

Groundwater Total recharge (1998, km3) 9.8 Per capita (1998, m3) 168 Withdrawals (1990, km3) 3.0 For domestic use (<1990) 51% For industry (<1990) 47% For agriculture (<1990) 3%



Northern Ireland’s Water Service In 2003, the Government started considering the reform of Water Service (WS), Northern Ireland’s water and sewerage services. WS was created as an agency of the former Department of the Environment for Northern Ireland in 1996. It serves 720,000 domestic, agricultural, commercial and business customers (1.7million people) across Northern Ireland against a backdrop of historic under investment and ageing water and sewerage infrastructure. Northern Ireland, along with the Irish Republic does not directly charge for its domestic water and sewerage services. In August 2004, the Government decided that Water Services Northern Ireland will become a Government Owned Company from April 1st 2006. From 2008/09, the Water GoCo will be entirely self-financing, in time for the EU’s Water Framework Directive’s 2010 self-financing deadline. 99% of households are connected to the water network, which supplies 710Ml per day. Demand is forecast to grow by 150 Ml per day by 2030. In contrast, only 83% of households are connected to the sewerage network, and Water Service has to service 59,000 private septic tanks. Average leakage levels in Northern Ireland are 37% of treated water supplies. In 2003, WS aims to treat 56% of the population’s effluents and it is already set to miss the EU’s 2005 wastewater treatment targets by at least 20%. Scottish Water Scottish Water was formed from the merger of North of Scotland Water, East of Scotland Water and West of Scotland Water in 2002. These in turn arose from the merger of 11 municipal entities in 1996. The Water Industry Commissioner (Scotland’s equivalent of Ofwat) has earmarked £1.8 billion capital spending to be carried out between 2003 and 2006. Over the next four years, Scottish Water, through two private consortia (Stirling Water and United Utilities, under the title of Scottish Water Solutions), will upgrade water and sewage treatment facilities throughout the country. Scottish Water is responsible for 1,127 reservoirs and operates 441 water treatment plants and 643 sewage treatment works.

MAJOR CITIES Population 2000 2015 Status London 7,640,000 7,640,000 Thames Water Birmingham 2,272,000 2,272,000 Severn Trent Water Manchester 2,252,000 2,252,000 North West Water Leeds 1,433,000 1,433,000 Yorkshire Water Tyneside 980,000 1,026,000 Northumbrian Water Liverpool 915,000 951,000 United Utilities

PFI in Scotland and Northern Ireland The Private Finance Initiative (PFI) is being used to help fund Scotland’s sewage treatment compliance programme after it became evident that political and public opposition to privatising Scotland’s water and sewerage assets and operations would be insurmountable. In 1993, the Government estimated that the cost of EU environmental compliance for these activities would be £5 billion by 2005-10. The EU’s UWWTD and its 2000 and 2005 compliance deadlines have driven the PFI in Scotland. While water and sewerage in Scotland and Northern Ireland remain public, they will be subject to constraints on spending and have limits on borrowings. There are a total of 23 PFI sewerage schemes in Scotland, with an original value of £587 million. Wherever possible, construction work was due to commence in 1998 with a completion date of 2000. In reality, there have been significant delays in the awarding process. For example, Aberdeen and Peterhead was only awarded to Kelda’s consortium in August 1999, with completion of the main project in 2001 and for a further facility in 2005. A number of the original schemes have been grouped together in order to achieve economies of scale. The main schemes to date are as follows (£ million):

Scheme Authority Value (£m) Consortium Almond Valley & Seafield East 100 Thames Water, M J Gleeson & Montgomery Watson Esk Valley East 20 Thames Water, M J Gleeson & Montgomery Watson Levenmouth East 50 Northumbrian and Degrémont Ayrshire East 50 Northumbrian, Degrémont and AMEC Inverness & Fort William North 45 United Utilities Tay North 84 United Utilities Morray Coast North 60 United Utilities Aberdeen & Peterhead North 80 Yorkshire Water, BICC & Earth Tech Daldowie & Shieldhall West 57 Caledonian Dalmuir West 50 Taylor Woodrow, SAUR, Stereau, Barr & Halcrow Inverclyde West 50 Northumbrian & Degrémont (Suez) & AMEC Kinnegar N. Ireland 10 UU & Lagan Holdings Newry N. Ireland N/A Earth Tech



In Northern Ireland, proposals are being developed for PFI financing through the Alpha (£153 million on water treatment works) and Omega (£122 million on wastewater treatment works) projects for implementation in 2004 and 2005 respectively. Further privatisation projects are under consideration.

Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company England & Wales Project Aquatrine, Package A Kelda / Earth Tech England Inset appointment for RAF Tidworth Thames Water England Inset appointment for RAF Finningley Anglian Water England Inset appointment for Wynward Park Anglian Water England Inset appointment for Buxted chickens Anglian Water England Inset appointment for brewery sewerage Albion Water Wales Inset appointment for Shotton Paper Albion Water West Scotland Daldowie sewage treatment PFI Caledonian (ScottishPower) West Scotland Dalmuir sewage treatment PFI SAUR (Bouygues) West Scotland Inverclyde sewage treatment PFI Northumbrian Water Group North Scotland Inverness sewage treatment PFI United Utilities North Scotland Moray Coast sewage treatment PFI United Utilities North Scotland Tay sewage treatment PFI United Utilities North Scotland Aberdeen sewage treatment PFI Yorkshire Water (Kelda Group) East Scotland Esk Valley sewage treatment PFI Thames Water East Scotland Almond Valley sewage treatment PFI Thames Water East Scotland Ayr sewage treatment PFI Northumbrian Water East Scotland Levenmouth sewage treatment PFI Northumbrian Water Northern Ireland Kinnegar sewage treatment PFI Hyder Infrastructure Northern Ireland Newry sewage treatment PFI Earth Tech

Only companies referred to in this book are mentioned in the above table. There are a number of specialist non-sewerage service companies involved in various PFI consortia. For the sake of brevity, only contract awards made since 1989 have been included in the above table, while the table below consolidates all of each company’s contracts. For example, the Northumbrian Water Group entry represents two former SWCs, three PFI contracts and Northumbrian Water.


Water Sewerage Total Anglian Water AWG (UK) 4,075,000 5,700,000 5,792,000 Dwr Cymru Glas Cymru (UK) 2,788,000 3,043,000 3,043,000 Northumbrian Water Northumbrian Water (UK) 4,185,000 2,547,000 5,406,000 United Utilities United Utilities (UK) 6,840,000 7,230,000 7,230,000 Severn Trent Water Severn Trent (UK) 7,280,000 8,280,000 8,280,000 Southern Water South Downs (UK) 2,200,000 4,170,000 4,170,000 South West Water Pennon Group (UK) 1,516,000 1,394,000 1,516,000 Thames Water RWE (Germany) 7,360,000 12,400,000 12,400,000 Wessex Water YTL Holdings (Malaysia) 1,162,000 2,397,000 2,397,000 Yorkshire Water Kelda Group (UK) 4,625,000 5,093,000 5,258,000 Bournemouth Biwater Group (UK) 424,000 0 424,000 Bristol Water Bristol Water Holdings (UK) 1,066,000 0 1,066,000 Cambridge Water CKI (China) 290,000 0 290,000 Cholderton Water Cholderton Water (UK) 3,000 0 3,000 Dee Valley Dee Valley Group (UK) 258,000 0 258,000 Veolia Water UK VE (France) 3,310,000 0 3,310,000 Mid Kent Water Swan Group (UK) 569,000 0 569,000 East Surrey East Surrey Holdings (UK) 473,000 0 473,000 Portsmouth Water Brockhampton Group (UK) 655,000 0 655,000 South East Water Macquarie (Australia) 1,500,000 0 1,500,000 South Staffordshire South Staffordshire (UK) 1,233,000 0 1,233,000 Earth Tech Tyco International (USA) 0 63,000 63,000

Case study: British Waterway’s proposed ‘water grid’ England and Wales are set to face increasing seasonal and regional differences in precipitation and evapotranspiration. By 2020, summer precipitation in South East England will decrease by at least 3-5% with evapotranspiration increasing by up to 20-25%. The increasing seasonality of rainfall will in turn reduce the recharge season for groundwater, with winter run-off rising, while run-off will fall by 5-20% during low flow periods, when rivers are at their most sensitive. At the same time, economic growth is concentrating on the South and East, in turn encouraging a demographic shift towards these regions. Demand for water resources is growing in those areas where its availability is falling. Current projections point to a need for 1.0-1.4million new household units being needed in



South East England in the next 25 years. Occupants are expected to be more affluent than on average and will seek to use water intensive consumer goods such as power showers and dishwashers. British Waterway's (BW) canal network has the potential to become a ‘water grid’ both serving industrial customers directly through inset appointments and providing water for utilities operating in the more water short areas. This also involves guaranteeing deliveries of water at times of actual or potential shortage, thereby augmenting extant resources without the need to construct new reservoirs, which are looking increasingly untenable in terms of rates of return as well as public and environmental concerns. Although the areas of greatest scarcity are East Anglia and Southern and South East England, both Thames Water and Severn Trent Water have been considering constructing at least one major new reservoir at a cost of £250-400 million each, by 2020.

UNITED STATES OF AMERICA PART 2: COUNTRY ANALYSIS


UNITED STATES OF AMERICA There are two proverbs which are often quoted to illustrate the nature of water services in the USA: “whisky’s for drinking, water’s for fighting over” (Mark Twain) and “water flows uphill to money and power” (Californian, anonymous). As with all good proverbs, the underlying realities are somewhat more complex. It was only in 1997 that the private sector was provided with a level playing field to compete with municipalities. At the same, time, while there are 54,000 individual water provision entities in the country, along with 16,000 sewerage entities, notable strides towards the consolidation of the sector have been taking place behind the scenes. In 1998, VE announced that it regarded the USA as an ‘emerging market’ with regards to water and sewerage services, and little has changed since. The USA represents the largest market for water and sewerage services, and in terms of opportunities, the market offering the most opportunities. Veolia's 1999 acquisition of US Filter was the largest corporate deal in the sector’s history. This has been followed by RWE’s agreed bid for American Water Works, highlighting how the European majors value the US market. Capital spending on environmental and drinking water quality has been curbed by the move towards homeland ‘water security’ and higher defence spending after 11th September 2001.


Regulatory background The Environmental Protection Agency (EPA) implements a series of regulatory programs under the Clean Water Act (CWA) and the Safe Drinking Water Program. The Federal Water Pollution Control Act, or Clean Water Act (1948, last amended 1987) seeks to maintain the "chemical, physical, and biological integrity of the Nation's waters." Under the Clean Water Act all discharges to surface waters of the U.S. must be treated to the level of secondary treatment. The Safe Drinking Water Act (SDWA), amended 1996, requires the EPA to set standards for contaminants in drinking water, monitor drinking water quality, and carry out compliance and enforcement actions. By the mid-1980s the federal government had spent US$400 billion on water resource development. From 1972 to 1998 compliance work for the Clean Water Act was supported by US$68 billion in federal assistance for the construction of local wastewater treatment systems, while state and local governments contributed a further US$20 billion. Since 2001, there have been various moves to downgrade water and wastewater standards and spending priorities, for example, declining to adopt WHO drinking water standards on cost grounds. This has led to some uncertainty about the development of longer term spending plans. Service provision 740,000 people lacked access to potable water in 1999. A US$210 million project was launched in 1999 to rectify this through direct investment in suitable distribution facilities. US Environmental Protection Agency (EPA) standards were being met or exceeded by more than 90% of water utilities in the USA in 1999. These guideline standards are being revised to bring them in line with WHO standards. In Western Europe, similar compliance figures are typically in the 95-99% range. In 1994, 19% of the population (45million people) was served at some point during the year with substandard water in terms of bacterial or chemical pollution. This was reduced to 6% by 2002. Non-compliant water: bacterial contamination

1993 1994 1995 Number of systems 1,000 750 400 Population (million) 12.1 10.8 9.0

Lead in drinking water has only recently become an area of concern. Perhaps 10-15million people are receiving water with lead levels above the WHO standard of 50ppb. Given that the WHO standards have been revised to 10ppb, it is evident that perhaps 20% of households currently receive drinking water above the new acceptable levels.




Water quality Overall, 50% of the country's 2.4million kilometres of streams and an unknown percentage of the nation's groundwater is polluted to a significant degree. In 1996, 19% of the USA’s 3.6million miles of rivers were surveyed. 56% of the rivers in terms of river length were regarded as being of good quality and 8% of fair quality. Some form of pollution or habitat degradation impairs the remaining 36% of the surveyed river miles. Excess levels of nitrates and phosphates were noted in 14%, with high bacterial levels in 12%. Agricultural waste was noted in 25% and runoffs from municipal sewage treatment plants in 5%, with urban runoff and storm sewers affecting a further 5%. Urban sewerage and sewage treatment is generally well developed. In contrast, smaller communities have been poorly served to date and many municipally run facilities that are understood to be in poor condition. Sewage treatment development

1982 1984 1992 1996 Tertiary 22.8% 27.4% 32.0% 33.0% Secondary 25.0% 23.0% 25.0% 24.0% Primary 14.0% 13.0% 18.0% 18.0% Connected 64.0% 63.0% 75.0% 75.0%

According to the American Society of Engineers (ASCE), in 2003 there will be an annual shortfall of US$11 billion for replacing or rehabilitating water and wastewater facilities in the United States. The overall condition and performance of the country's drinking water and wastewater systems has worsened since the previous evaluation by ACSE in 2001. Currently, the federal government spends about US$2.5 billion annually for drinking water and wastewater treatment facilities. The proposed federal budget for FY 2004 includes a US$360 million cut in wastewater funding, while the level for drinking water spending remains unchanged. The EPA anticipates that the percentage of the population receiving sewage treatment will increase from 66% in 1996 to about 88% by 2016.

Urban services Safe drinking water 98% Access to sewerage 90% % Sewage treated 80%

Market size (from various reports, 2002-04) There is a market for operating water and sewerage services worth US$47-53 billion per annum. The market for water supply to households (110million households at an average of US$300 per annum) in the USA is worth US$33 billion pa. This excludes s ewerage services.

US$billion pa High Low Mean Water – O&M 32.7 25.7 29.2 Sewerage – O&M 30.8 21.4 26.1 Water – Capex 20.1 11.6 15.9 Sewerage – Capex 20.9 13.0 17.0 Total 104.5 71.7 88.2

Depending upon the source, replacing the USA’s aging water and wastewater network and upgrading and extending treatment facilities in the United States is expected to cost US$550–1,000 billion over the next 20 years. Government funding is anticipated to cover US$535 billion over the next 20 years, according to the US Environmental Protection Agency Water Infrastructure Network. But as shown by the limited funds allocated since 1997, this is open to question, with the proportion of costs being covered by government funding falling from an average of 50% to an extreme of 10% in 2003. Since 2000, Government funding has resulted in a projected US$23 billion pa shortfall over the next two decades. This has to be funded by municipalities, debt and innovative ways of delivering performance improvement. Non-compliant water supplies

Systems Reporting Violation Population Affected Coliform bacteria 12,246 24.7m Inadequate filtration 1,478 20.5m Faecal bacteria 2,726 11.9m Lead 3,641 5.0m Nitrate 588 0.5m Chemicals/pesticides 325 0.9m

Source: Environmental Working Group based on EPA data. US Water News January 1998. The treatment of microbiological contaminants in water will require US$20 billion, with 35% of surface water systems needing filtration equipment installation, upgrading or replacement.



Water use rose from 1950 to a peak in 1980 and has declined since 1985 as various efficiency and cost accounting measures have made an impact.

Billion US gallons per day 1980 2000 Cooling water for power 210 195 Irrigation 150 137 Municipal 34 43 Other 46 33 Total 440 408

Sewage treatment works upgrade costs

Customers US$billion Facilities 50,000 + 58.5 43% 800 2% 3 – 50,000 41.4 30% 6,800 13% Up to 3,000 37.2 27% 46,000 86% Total 137.1 100% 53,600 100%

The cost needed over this period to reach a universal level for secondary treatment (and where appropriate, tertiary treatment) has separately been estimated by the EPA at US$120 billion. This includes US$44 billion for treatment, US$10 billion for sewer repairs and rehabilitation, US$21 billion for new sewers and US$45 billion to correct combined sewer overflows. Capital spending needs for drinking water and wastewater for 2003 until 2023 were estimated at US$492 billion to US$820 billion, according to the Congressional Budget Office. These figures mirror those recently drawn up by the US EPA at US$499 billion to US$929 billion.

Freshwater Total (1998,km 3) 2,459.1 Per capita (1998, m3) 8,983 Withdrawals (1998,km3) 447.7 For domestic use (1998) 8% For industry (1998) 65% For agriculture (1998) 27%

Market structure There are approximately 200,000 water supplies in the USA. 120,000 of these are point suppliers for institutions such as businesses and schools. There are 60,000 community suppliers, providing water on a regular basis to at least 15 service connections or 25 people. The American Water Works Association (AWWA) has 56,000 member companies. A great majority of these companies are highly localised in nature. Some 80% of the population is served by 24,000 municipally owned and operated water companies. While there are 6,000 private sector water systems, the great majority of these are local enterprises, having been set up to provide water to a specific locality. There are 374 entities serving 75,000 or more people. Some 95% of private sector contracts have a turnover of less than US$1 million pa, equivalent to less than 8,000 people. Market structure for water provision

Total number of entities 56,000 Local systems 26,000 Government owned 24,000 Investor owned 6,000 Market listed 14 Internationally held 5

A major private sector company may act as the ultimate holding company for a large number of individual water companies. American Water Works (RWE), the largest water company in the USA serves 879 separate communities, at an average of 8,500 people per community. 80% of water supply systems are groundwater based, while less than 10% use surface water alone. The larger companies tend to make more use of surface water. According to the EPA, 84% of the systems serving more than 75,000 people use surface water.



Water provision market structures

Structure Size of Operation (Population Served)

Number of Service Providers

Est. Population Served (million)

Very Large >100,000 350 116.3 Large 10,001 - 100,000 3,432 96.5 Medium 3,301 - 10,000 4,498 26.1 Small 501 - 3,300 14,341 20.1 Very Small <500 31,262 5.1 Total 100% 53,783 264.1

Source: US EPA, 2004. The percentage of costs recovered for drinking water varies by size of the system. In 1995, while only about 60% of the smallest systems recovered their costs, the number of profitable systems rose in the larger size categories (serving over 50,000 customers per system) that serve majority people. Revenues for approximately 84% of publicly owned and 94% of privately owned systems covered their operating costs.

Groundwater Total recharge (1998,km3) 1,514.0 Per capita (1998, m3) 5,531 Withdrawals (1990,km3) 110.5 For domestic use (1990) 23% For industry (1990) 6% For agriculture (1990) 71%

Opening the market According to the EPA, in 1995, 34.3million people had their drinking water provided by the private sector. Their total turnover that year was US$14 billion. This study has identified 22 private sector companies with a Wall Street market listing providing water and/or sewerage services to a combined total of 33.5million people. In 1998, 95% of sewerage services were in municipal hands, along with 85% of water provision in terms of the population served. Until 1997, municipal water suppliers had several inbuilt advantages over the private sector. They enjoyed favourable tax differentials, a lower cost of capital, no need to make a profit, no penalty clauses for contract underperformance and no risk management was called for. These advantages were equivalent to a 30% cost advantage when bidding. A municipality can also bury the real costs by shifting administrative staff to other departments. The public sector finds it more challenging to compete for 10-20 year contracts, because of the need to guarantee interest rates for the longer term, while the private sector has tended to avoid seeking five year contracts in recent years. With an allowable return on investment of 10-12%, the water sector is regarded as offering low political risk, along with slow and steady profits. Pressure to privatise is only really taking place because of new environmental and public health standards at a time of spending constraints and a dislike of higher bills. The Presidential Executive Order 12803 of 1997 was designed to encourage private-public service partnerships, allowing the use of non-recourse taxable and tax exempt debt financing. In addition, if a STW is privatised, previous grants do not have to be repaid in full. Instead, these can be amortised. This process was first us ed for Cranston, Rhode Island in 1998. At the same time, the IRS announced that it would allow privatisation related operating contracts to run for up to 20 years. Breakdown of USA water and wastewater services market, 2001

Million people Water Sewerage Regulated utilities 23.5 8.8% 0.8 0.3% Municipal outsourcing 18.0 6.5% 21.6 7.8% Municipal 192.8 69.5% 185.0 63.9% Privately served 42.0 15.2% 77.4 28.0% Total 276.2 100.0% 276.2 100.0%

Source: D A Ll Owen, company database, US EPA. It is easier to gain a concession for sewerage than for drinking water projects, where contract awards to date have been on an O&M basis. New legislation will be needed to change this. One of the principal constraints is the use of rate of return (ROR) pricing mechanisms. With ROR, excessive investment can be called for to boost overall returns, while contract management costs are boosted by their need to be reviewed every 12-18 months. While the traditional private sector water companies tend to concentrate on water provision contracts, the majority of actual privatisations to take place since 1996 and especially since 1998 have been for sewerage and sewage treatment.



MAJOR CITIES

Population 2000 2015 Status New York 16,732,000 17,944,000 Some districts privatised Los Angeles 13,213,000 14,494,000 Some districts privatised Chicago 6,989,000 7,603,000 BOO for sewage treatment underway Washington, D.C. 3,952,000 4,446,000 Privatisation under consideration Philadelphia 4,427,000 4,873,000 Some districts privatised San Francisco 4,077,000 4,548,000 Water construction privatisation underway Dallas 3,937,000 4,465,000 N/A Detroit 3,809,000 4,193,000 Privatised water provision Houston 3,386,000 3,816,000 Partly privatised, United Water Resources Boston 2,934,000 3,260,000 N/A San Diego 3,002,000 3,445,000 Privatisation under consideration Atlanta 2,706,000 3,100,000 Privatisation of sewerage management Phoenix 2,623,000 3,029,000 N/A Minneapolis 2,378,000 2,688,000 N/A Miami 2,224,000 2,524,000 Some sewage treatment outsourcing Seattle 2,097,000 2,397,000 Private water provision contract Saint Louis 2,084,000 2,335,000 N/A Tampa 2,064,000 2,362,000 DBO contract for water treatment Baltimore 2,053,000 2,308,000 N/A Cleveland 1,735,000 1,940,000 N/A Pittsburgh 1,735,000 1,939,000 N/A Riverside – SB 1,699,000 2,013,000 N/A Denver 1,698,000 1,924,000 N/A San Jose 1,635,000 1,860,000 N/A Fort Lauderdale 1,471,000 1,689,000 N/A Kansas City 1,460,000 1,667,000 N/A Sacramento 1,408,000 1,640,000 N/A Portland 1,328,000 1,516,000 N/A Cincinnati 1,323,000 1,500,000 N/A San Antonio 1,318,000 1,513,000 N/A Milwaukee 1,278,000 1,407,000 Private-public partnership for sewage Norfolk 1,963,000 2,329,000 N/A Orlando 1,226,000 1,449,000 N/A West Palm Beach 1,143,000 1,363,000 N/A New Orleans 1,079,000 1,217,000 Sewage treatment privatised Columbus 1,067,000 1,222,000 N/A Indianapolis 1,008,000 1,151,000 Privatisation under consideration Las Vegas 995,000 1,188,000 N/A Buffalo 990,000 1,119,000 Water management privatised Providence/War 916,000 1,044,000 N/A Salt Lake City 911,000 1,051,000 N/A Oklahoma City 901,000 1,039,000 Sewage treatment privatised Memphis 894,000 891,000 N/A Jacksonville 883,000 1,025,000 N/A Louisville 785,000 891,000 N/A Austin 759,000 903,000 N/A

Development of O&M and DBO outsourcing contract awards in the USA, 1996-2002

US$(million) 1997 1998 1999 2000 2001 2002 Municipal O&M 601 659 802 900 921 1,078 Industrial O&M 22 50 314 352 347 363 Total O&M 623 709 1,116 1,252 1,268 1,441 Municipal DBO 16 92 178 175 137 153 Industrial DBO 22 32 158 132 44 38 Total DBO 38 124 336 307 181 191 Total reported revenue 661 833 1,452 1,559 1,449 1,632 Other companies 99 125 218 234 217 245 Total market 670 958 1,670 1,793 1,666 1,877

Source: Public Works Financing, March 2003 As there are two separate markets for PSP in the USA, it is necessary to split corporate activities into those where the assets are owned by the private sector (regulated activities) and those where they remain in municipal hands



(O&M). The former has a turnover of US$100-150 per capita against US$35-40 for the latter. The tables below ranks the major players in terms of populations served in both classes: Leading regulated utilities (Y/E 31/12/2003, US$million)

Company Parent company Regulated turnover People served American Water Works American Water Works [4] 1,485 10,300,000 United Water Resources Suez [1] 360 2,150,000 Aqua America Aqua America 355 2,545,000 California Water Service California Water Service 277 1,695,000 Southern California Water American States Water 187 920,000 San Jose Water SWJ Corp 150 990,000 Aquarion Kelda Group [3] 170 677,000 Elizabethtown Water RWE [2] 140 650,000 Utilities Inc Nuon [4] 61 905,000 Middlesex Water Middlesex Water 64 375,000 Southwest Water Southwest Water 57 452,000 Connecticut Water Service Connecticut Water Service 47 302,000 Artesian Water Company Artesian Resources 36 230,000 Pennichuck Water Pennichuck Corporation 21 130,000 York Water York Water 21 156,000 Birmingham Utilities BIW 5 37,000 Total 3,436 22,514,000

Differing year-end dates: [1] 12/1999 [2] 03/2001 [3] 03/2004 [4] 12/1002 Numbers are below those for 2002, due to various companies being sold off during 2003-04. Leading O&M companies (Y/E 12/2002, US$million)

Company Parent Total O&M DBO People served US Filter OS VE 352 289 63 10,500,000 United Water Suez 205 205 0 5,250,000 OMI CH2M Hill 190 151 39 5,000,000 AWS AWW (RWE) 153 135 18 6,000,000 Severn Trent OS Severn Trent 99 99 0 2,715,000 Earth Tech Tyco 70 45 25 2,145,000 Eco Resources South West Water 62 60 0 1,440,000 Thames Water RWE 31 31 0 810,000 Env. Mgt Corp. BOC 30 25 5 815,000 Woodward & Curran Privately held 21 21 0 690,000 Alliance Water Privately held 14 14 0 230,000 HMMOS HMM 3 3 0 50,000 Total 1,230 1,078 153 35,645,000

Source: Public Works Financing, March 2003, company data. Sources: NAWC (1999). NAWC privatisation study. A survey of the use of public-private partnerships in the drinking water utility sector. Hudson Institute, USA.

URUGUAY PART 2: COUNTRY ANALYSIS


URUGUAY Private sector participation has been developed in a gradual manner over the past three years. This has allowed the market to develop in a less contentious manner than has been s een in other markets.


Water and sewerage services

Access to safe water in Uruguay is high by South American standards, at 88%, with 45% of water subject to treatment. Although 92% have sanitation, only 48% are linked to the sewers and the on-site sanitation is normally considered inadequate. The quantity and quality of coverage is better in the capital, Montevideo, than in the provincial towns or rural areas. Many residents have restrictions on supply during the summer months.


Sewerage development The Government’s current priority is for the development of a sewerage network and suitable treatment facilities. Currently, 47million m3 pa of effluents are treated in the city of Montevideo and a further 22million m3 in other provincial cities. The World Bank has provided US$42 million of the US$73 million currently being spent on this work. In May 2003, OSE, Uruguay’s state water utility, called for tenders for its US$48 million modernisation and systems rehabilitation program project. This includes the construction of a water supply main in the city of Salto and the construction of a new wastewater treatment plant for Durazno. The project is partly financed by a US$27 million loan from the World Bank.



In 1997 Aguas de Barcelona acquired 60% of Aguas de la Costa, which carries a 10 year optional extension from 2018. The Punta del Este area is principally used for upmarket tourism and leisure services. Iberdrola and C de Aguas de Bilbao Bizkaia gained a US$150 million concession in 2000.


MAJOR CITIES City 2000 2015 Comments Montevideo 1,324,000 1,411,000 N/A Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Maldonado 30 year water and sewerage concession Iberdrola Energia consortium Punta del Este 25 year water and sewerage concession Aguas de la Costa Private sector company operations (Please see the relevant company entry for details)


Iberdrola Iberdrola (Spain) 260,000 260,000 260,000 Aguas Costa Agbar (Spain) 100,000 100,000 100,000

UZBEKISTAN PART 2: COUNTRY ANALYSIS


UZBEKISTAN 60% of the country’s 22.2million people live in rural communities. Between 1992 and 1996, the Government spent US$650 million on water provision projects, including US$130 million in the areas most affected by the loss of the Aral Sea. Since 1996, the World Bank has been involved in pilot projects for improving water distribution, management and sanitation. Projects In 2004, the European Bank for Reconstruction and Development (EBRD) approved the Tashkent Water Supply Improvement Project. The project envisages the replacement of existing water pumps, valves and transformers, the installation of a water distribution unit, pumping station, water meters and construction of a reservoir. In addition, it involves the preparation and implementation of a Financial and Operational Performance Improvement Programme for the Tashkent Water Company. Crisis Study: Central Asia and the Aral Sea Of the 122km 3 pa of river flows in central Asia, 90% is accounted for by two rivers discharging into the Aral Sea, namely the Amu Darya (73km3 pa) and the Syr Darya (37km3 pa), of which half reaches the Aral Sea under natural conditions. In addition, there are between 12 and 18km 3 pa of groundwater resources. Since 1960, the population living in the vicinity of the Aral Sea has increased by 140%. Abstraction through irrigation has increased from approximately 5% in 1900 to 125% by 1988, the excess figure being accounted for by run-off back into rivers from irrigation schemes. Intensive irrigation began in 1919 when central Asia was incorporated into the Soviet Union and increased rapidly between 1951 and 1986. In consequence, the Aral Sea had a free flow of 46km3 in 1966-70, compared with its natural inflow of 55km 3. By 1980-85, this had fallen to 2km3, and has only partially recovered since to 4km 3 pa. By 1992, the surface area of the Aral Sea had shrunk to 33,600km2 from its 69,500km2 natural area, with a 21-30 fold increase in salinity. Current forecasts envisage the Aral Sea stabilising at between 8,000 and 19,000km 2 by 2015-2020. 3% of water is used for domestic purposes, 10% for industrial applications and 87% for irrigation, mainly for cotton cultivation. The cotton plantations are regarded as the most inefficient in the world both for the intensity of water usage and the input of fertilisers and pesticides. In 1982, 12,000km2 of the country’s soil was salinated (36% of Uzbekistan’s surface area). This had increased to 16,430km2 (43% of the surface area) by 1985. Before the 1970s, the Aral Sea had 20 species of fish, 195 species of free-living invertebrates, 12 species of higher and 82 species of lower plants. By the mid 1980s, 5 fish species remained in the Aral Sea. Many algae also disappeared, and only one species of shield plants survived. The number of mammal species inhabiting in the Aral region was reduced from 70 to 30 and that of birds from 319 to 168 species. In Karakalpakstan, a semi-independent republic of Uzbekistan, women are victims of a pandemic of anaemia that has hit the small republic in the past decade. Studies show that of the 700,000 women living there, some 97% are anaemic with haemoglobin levels in their blood well below the World Health Organisation's standard of 110 grams per litre. Five times the percentage of women affected a decade ago, it is probably the highest rate in the world. One reason may be that local women cannot absorb iron because of high levels of metals such as manganese and zinc in the water. The people of Karakalpakstan also suffer from rising rates of thyroid and kidney disease. Over the period 1981 to 1987, it is estimated that liver cancers rose by 200%, throat cancers by 25% and infant mortality by 20%. Since 1980, a significant increase of human morbidity and mortality has been recorded. In Karakalpakstan the rate of hospitalisation increased from 20.2 to 24.9 per 100 persons between 1980 and 1987. The number of paratyphoid cases in Karakalpakstan was as much as 23 times that of the average in the former Soviet Union. Over the period of 10 years there has been an increase of total mortality by 15 times, of cardiac and vascular diseases by 1.6 times, of tuberculosis by 6 times, of gallstone disease by 5 times, and of throat cancer by 7-10 times. In some parts of the region, particularly in Bazataus Rayon of Karakalpakstan, child mortality exceeds 110 per 1000 births, and 60% of the children examined in Nukus and 64% of those in Karakalpak Autonomous Republic had health anomalies. In 2003, Mott MacDonald and Temelsu of Turkey were appointed to oversee a US$72 million ADB supported scheme to improve agricultural performance in the Ak Altin district by rehabilitating the irrigation and drainage systems. This pilot scheme is designed to be replicated on a broader basis, with the long term aim of developing a sustainable agricultural system.

UZBEKISTAN PART 2: COUNTRY ANALYSIS


Conflict Study: Avoiding Water Disputes in Central Asia In terms of trade and the movement of natural resources, Kyrgyzstan depends on Uzbekistan for fuel, Uzbekistan depends on Kyrgyzstan for water. Kyrgyzstan receives 50 billion m3 of rainwater per annum, with 38 billion m3 of this flowing into Uzbekistan. While Kyrgyzstan has less than 0.5 million Ha of land under irrigation, Uzbekistan has 1.5 million Ha, the main economic activity in Uzbekistan being cotton growing. The difficulty is that while fuel supplies are recognised as a commodity, there has been little progress in developing a common understanding as to the value of water resources. These conflicts are a legacy of the command economy left behind by the collapse of the Soviet Union in 1991. In terms of hydrology, as defined by the Helsinki Convention in May 1997 and adopted by the International Law Commission, all five countries on the Aral Sea have equal rights to the Aral Sea waters. Tajikistan and Kyrgyzstan, the upstream countries, have the largest amount of water surplus in the Aral Sea basin. The downstream nations of Turkmenistan, Kazakhstan, and Uzbekistan are dependent on the Aral Sea basin for irrigation especially during the hot summer months. The upstream nations of Kyrgyzstan and Tajikistan are dependent on the Aral Sea basin for hydroelectric power especially during the cold winter months. Water flows and abstraction in the Aral Sea basin.

Water flows (km3)

Withdrawals (km3)

Surplus/deficit (km3)

Afghanistan 6.0 1.0 5.0 Iran 3.5 1.0 2.5 Kazakhstan 4.5 11.0 -6.5 Kyrgytstan 29.0 5.0 24.0 Tajikstan 64.0 12.0 52.0 Turkmenistan 0.0 23.0 -23.0 Uzbekistan 9.0 58.0 -49.0

In 1998, the Governments of Kazakhstan, Uzbekistan and Kyrgyzstan agreed that Uzbekistan and Kazakhstan would buy hydroelectricity from Kyrgyzstan, with Kazakhstan supplying Kyrgyzstan with coal and electricity in winter. Practical problems remain. In 1999 Kyrgyzstan succeeded in getting much needed coal from Kazakhstan after closing down water reservoirs. In 2000, Uzbekistan cut water supplies to Kazakhstan, citing non-payment of debt. Kazakhstan asked Tajikistan to release more water to Uzbekistan, hoping that some of the extra water would flow its way. Tajikistan agreed in exchange for a supply of Uzbek electricity. Adding to Kazakhstan's problems is a proposed Chinese water diversion project involving the Ertis (Irtysh) River which is a source of drinking water in the country's industrial northeast. Sources: Akmansoy S. & McKinney D. C. (1998). Aral Sea Water Rights CRWR Online Report 1998-3. GWR (2000). Central Asia faces resource turmoil. GWR, 102 pp 4-5, FT Energy, London. Leads International Inc. (1997). Aral Sea Case Study Website. Klötzli, S. (1994). The Water and Soil Crisis in Central Asia – A Source for Future Conflicts? ENCOP Occasional Paper No. 11, Centre for Security Policy and Conflict & Swiss Peace Foundation, Berne / Zurich. Micklin, P. (2000). Managing water in Central Asia. Royal Institute of International Affairs, London.

VENEZUELA PART 2: COUNTRY ANALYSIS


VENEZUELA While officially cool about PSP, Venezuela is moving steadily towards the award of a number of significant O&M and concession contracts, which are in time expected to extend to Caracas.


A late entrant Venezuela was opposed to the privatisation of its water and utility services long after it had become acceptable across much of Latin America. The country’s water services were split into 10 regional entities and Hidrocapital in 1989. Problems in raising finance for capital projects in recent years have led the country to reconsider its position on private sector participation. In 1996, the government announced that it needed US$1 billion to upgrade water and sewerage services across the country, including US$500 million for Caracas. Venezuela intended to spend US$533 million on water and sewerage service upgrades in 1997, but some of this work had to be scaled back due to economic perturbations. The IADB provided US$102 million for water and sewerage upgrading work in 1998. International funds from oil reserves are being used to fund US$2 billion worth of public projects. The fund will allow the acceleration of some development projects already underway, such as the US$58 million El Diluvio dam and the US$100 million Metro de Los Teques system in Miranda state. In 2004, Venezuela announced that it has already met its potable water millennium goal of reducing by half the number of people (based on 1990 figures) who do not have access to potable water. The country aims to have 100% water coverage by 2015.


Caracas and Hidrocapital Water and sewerage services for Caracas and the state of Miranda are provided by Hidrocapital. Hidrocapital was corporatised in 1981, and operates a 90km aqueduct serving part of the city of Caracas. The company has 340,000 customers, 64,000 of whom pay their bills, while there are some 200,000 illegal or unregistered connections. In all, some 57% of water provided by Hidrocapital is unaccounted for. Hidrocapital has gained finance for a US$50 million upgrade that is to be linked to better billing. In Caracas, 76% of the population receive piped water and the sewerage network covers 53% of the population. Officially, 91% of the country’s urban population has access to safe water and 97% have adequate sanitation.


Hidroven Outside Caracas, water is managed by the state’s Hidroven utility. This entity has a number of affiliate companies. Comphania Hidrologicadel Lago (Hidrolago), for example serves the state of Zulia.

Freshwater Annual availability (1998) 846km 3 Per capita 35,002 m ³ Annual withdrawal (1985) 4km3 Domestic (1987) 44% Industrial (1987) 10% Agriculture (1987) 46%

PSP in Venezuela Private sector involvement began in 1997, when FCC of Spain was awarded a two year extendable water provision concession to the city of Monagas (650,000 people). Three privatisation contracts in Venezuela are currently under development. The Caracas water system is to be rehabilitated under private sector management.

VENEZUELA PART 2: COUNTRY ANALYSIS


The city had a population of 3.01million in 1995. Miranda state’s Fajardo water system is to be privatised and Margarita Island’s water and sewerage services are to be privatised through the award of a concession contract. Aguas de Valencia gained a 4 year water management contract for Lara state (population 1,500,000) worth US$20 million pa in 1999.


Zulia state Tecnicas Valencianas del Agua and Colombia’s Triple A gained an O&M contract with Hidrolago for the state of Zulia, including Maracaibo, Venezuela’s second largest city. A total of 21 municipalities will be served, covering a population of 3.5million people. The contract is worth $40 million pa. MAJOR CITIES City 2000 2015 Comments Caracas 3,153,000 3,587,000 Privatisation under consideration Maracaibo 1,901,000 2,604,000 O&M contract awarded Valencia 1,893,000 2,948,000 N/A Maracay 1,100,000 1,498,000 N/A Barquisimeto 923,000 1,164,000 N/A Ciudad Guayana 799,000 1,223,000 N/A Private sector contracts awarded (Please see the relevant company entry for details) Location Contract Company Monagas 30 year water provision concession Proactiva Zulia State Water O&M Tecvasa Private sector company operations (Please see the relevant company entry for details)


Proactiva VE (France)/FCC (Spain) 650,000 0 650,000 Tecvasa Tecvasa (Spain) 3,500,000 0 3,500,000

VIETNAM PART 2: COUNTRY ANALYSIS


VIETNAM The Vietnamese economy remains at an early stage of development after decades of political change. It is of interest to see the country turn to its old adversary for support in modernising its water services. While SAUR has made progress in this market, the withdrawal of Suez demonstrates the difficulty of operating in this market at present.


Management The Ministry of Science, Technology and the Environment was created in 1992, with the framework Law on Environmental Protection passed in 1993 and in effect since 1994. The MOSTE’s National Environmental Agency was set up in 1994. This resulted in a Country Programme for Clean Water Supply and Environmental Sanitation in 1995. The Ministry of Planning and Investment (created in 1995) has to approve all environment-related projects above a certain size. Water losses of 45-70% were identified, in the early to mid 1990s. The recent “open door” policy has increased the pace of change by exposing companies to new markets, im proved material standards and quality, and the transfer of technology. In 1994, the Ministry of Urban Construction (MUC) with the assistance of the World Bank issued an order to water companies to reduce water loss by 50% by 2005, and issued guidelines on how this should be achieved. The MUC proposed that water entities review losses, identify the loss components and calculate the cost of control, meanwhile eliminating flat rate tariffs so as to encourage water conservation. The main source of water loss is from illegal connections or illegal use, and from consumer meter under-registration. The MUD has in consequence sought to ensure that all consumers are metered along with introducing organisational changes to improve the accountability of the meter readers.


Policies and priorities 21% of urban households have access to piped water, with 35% using wells and the rest taking water from rivers. In the major cities, 80% of households have access to piped water or private wells. Average urban water consumption is 50-70L per capita per day. 34% of households are either connected to the sewerage system or have septic tanks. Other households either share facilities or use latrines. In March 1999, a decree was passed seeking to have 60-80% of urban sewage and storm waters connected to a sewerage network by 2020, with 90-100% coverage in Hanoi, Ho Chi Minh City and other major cities and industrial zones. The Government expects this to be self-funded through payments from the public and industry. The intention is to create a series of non-profit urban drainage public service corporations. Between 1999 and 2005, the focus will be on developing storm sewerage systems for Hanoi and Ho Chi Minh City.


Private sector involvement With the exception of Hanoi and Ho Chi Minh City, current projects are mainly aid related. For example, a 10 year bulk water supply project for Hai Phong (population 570,000) has been underway since 1990, involving US$20 million of ODA from Finland, along with US$5 million from the Vietnamese Government. This project was extended in 1999 with a US$29 million project to expand the city’s water provision network between 1999 and 2002. The World Bank is also active in Vietnam, having provided a loan of US$32.5 million for a US$48.5 million project to expand Hanoi’s water supplies (currently 100,000m3 per day) through two new 30,000m3 per day water treatment works along with allied water distribution systems.

Freshwater Annual availability (1998) 376.0km 3 Per capita 4,827m3

VIETNAM PART 2: COUNTRY ANALYSIS


Annual withdrawal (1992) 54.3km3 Domestic (1987) 4% Industrial (1987) 10% Agriculture (1987) 86%

Groundwater Annual availability (1998) 84.0km3 Per capita 1,078m3

Setbacks for the private sector In August 2000, the Government announced that no foreign investment would be allowed in Hanoi, while no further foreign BOT contracts would be awarded. Then in 2003, Suez withdrew from its Ho Chi Minh BOT, as part of a corporate retreat from riskier markets. Subsequently, the Asian Development Bank has indicated that it was not happy with Ho Chi Minh City’s decision to seek new bids solely from Vietnamese companies for the 300,000m 3 per day Thu Duc water treatment BOT.

MAJOR CITIES City 2000 2015 Status Ho Chi Minh City 4,619,000 6,251,000 Bulk water provision privatised Hanoi 3,751,000 5,227,000 Privatisation under consideration Hai Phong 1,679,000 2,269,000 N/A

City study: Hanoi The Hanoi Water Supply Company was set up in 1954 by Hanoi’s Department of Transport and Public Works. In 1991, 620,000 people were served by 51,705 household connections, with a further 238,000 being served by public taps at an average ratio of one tap per 170 people. 69% of people within the city area were served with water for an average of 12 hours per day. Leakage was estimated at 53% in 1991 and drinking water was typically boiled before use. In Hanoi, water loss is increasing (currently 160,000m3/day) while the source is being depleted - the groundwater level is dropping by 1.0m/year. By 1994, 32% of total production was billed. The 68% of water unaccounted for comprised 43% typically referred to as distribution losses, 20% identified leakage, and 5% for the water company’s own use. The volume of billed water is currently decreasing, despite the repair of 1000 leaks/year and disconnection of 2000 illegal connections each year. It is therefore assumed that the rate of increase of illegal connections is greater than the rate of leak repair. Consumer studies are seen as an immediate requirement to identify or address consumer waste, illegal connections, tariff charges , and consumer contracts. Currently, 50% of Hanoi’s 200,000 customers have contracts for revenue payment. The Hanoi water sector was reorganised in early 1994 into a new company the Hanoi Water Business Company, whose business aims are to have 100% of consumers registered, all with meters and at least 85% of water costs recovered through tariff collection, supported by a 24 hour service level.

YEMEN PART 2: COUNTRY ANALYSIS


YEMEN Annual renewable water resources are estimated at 2.5billion m3 pa, equivalent to 140m 3 per person pa, compared with the Middle East and North Africa average of 1,250. By 2005, consumer demand in the country is expected to rise to 3.42billion m 3 pa, a shortfall of 920million m 3 pa. The uneven nature of water resources means that 90% of the population has under 90m 3 annually for domestic use, some 10% below the worldwide norm. 44% of the population have access to mains water supply and only 12% to safe sanitation. According to the UNDP and other donors, the exhaustion of the usable non-renewable groundwater stock (estimated at about 3billion m3) will occur by 2010-2020, meaning that total water availability in the Lusaka Basin would be then limited essentially to the estimated annual natural recharge of 30-50million m3 which is equivalent to the present level of domestic and industrial water use In 2002, the World Bank approved €$134 million (US$130 million) loan to upgrade water supply and sanitation services in urban communities. Through improved operation and reduction of water losses, the project will increase water supplies and provide affordable sewerage facilities, which will enable wastewater to be reused for agriculture. Cost recovery mechanisms will be introduced. This is to be linked to creating opportunities for PSP in the longer term. Also in 2002, the World Bank and IDA announced that it was inviting prequalification bids for a lease contract for the provision of water and wastewater services for Sana'a’s Water Supply and Wastewater Services Local Corporation (SWSWSLC). In the Sana’a basin, where 10% of the population live, it was estimated in the mid 1990s that water extraction (224million m3) exceeded the level of recharge (42million cm³) by over 400%. In Amran water levels have dropped 60m during the last twenty years and by 30 metres between 1995 and 2000. In 2003, Yemen’s Water and Sanitation Corporation has invited contractors to pre-qualify for a contract to design and build a 10,000m 3 per day extension to the existing Ibb sewage treatment plant. The work will be financed by Germany’s KfW and the Government.

ZAMBIA PART 2: COUNTRY ANALYSIS


ZAMBIA During 2002, Zambia embarked on water resources reform through the Water Resources Action Program (WRAP) under the Ministry of Energy and Water Development (MEWD). The program, supported by the Water and Sanitation Program's (WSP) Zambian office, aims to develop a new institutional and legal framework to manage the water resources of the country, promoting poverty alleviation and sustainable development. The process will encourage the engagement of policymakers and public-private sector discussions. According to the WHO, 95% of the urban population had access to safe drinking water in 1996, along with 95% having improved sanitation. The WHO’s 2000 estimate is for 88% urban access to safe drinking water and 99% access to improved sanitation. Rural coverage is estimated at 48% and 64% respectively. The Kafubu municipality’s Water and Sewerage Company (KWSC) has instigated water kiosks for the 13,000 people in Kaloko community, where residents can buy water at a nominal fee of ZMK2 (€0.01). The 19 kiosks will include a tap connected to the municipality's water pipeline, and are manned by a member of the community who fills the residents’ containers with water. In Lusaka, the water sector estimated generated revenues of K260 million in 1999 through billing with expenditure requirements of K1.5 billion for recurrent expenditures alone. Capital spending was K5.23 billion in 1998 and K5.09 billion in 1999. If all potential revenues were collected under the current pricing regime, these could have totalled up to K1.52 billion in 1999, indicating that new sources of finance are required for capital expenditure work. In order to cover capital expenditure, the LWSC needs the following:

• Up-dating of the water right holder data base; • An efficient billing system; • Functioning revenue collection system; • Inclusion of ground water tariffs; and • Regular adjustments of tariffs to ensure that the real value of revenues is not being eroded.

In 2002, a PSP workshop was held to consider options for the LWSC (Lusaka Water and Sewerage Authority). Lease and concession models were considered to be the most appropriate for the city. In 2003, Nkana Water and Sewerage Company became first company to issue a municipal bond on the Lusaka Stock Exchange (LuSE). The bond is intended for a water provision project in which the company would be building a pipeline from Kitwe to Kalulushi.


PART 3: COMPANY ANALYSIS

ARGENTINA PART 3: COMPANY ANALYSIS


ARGENTINA LATIN AGUAS Latin Aguas was founded in 1990 and in 1991 it became the first company to gain a water concession in Argentina. The company is the largest privately held Latin American owned water company. Projects have also been carried out in Brazil, Peru, Nicaragua, Dominican Republic and Ecuador. Latin Aguas is owned by the Chamas family, who specialise in construction work in north east Argentina. Three concessions serving 1.8million people have been gained to date. Aguas de Corrientes This concession, gained in 1991 was the first water and wastewater concession awarded in Argentina. Aguas de Corrientes SA covers 147,500 customers in 10 cities of the province of Corrientes. The company was the first water operator to gain the ISO9002 certification for customer service. Aguas de Salta The 30 year concession for water and wastewater services to Salta province was awarded Aguas de Salta in 1998. Aguas de Salta is a joint venture between Latin Aguas and JCR. It covers 100 municipalities, with 36% of the population originally having inadequate water and wastewater service coverage. Restrictions on water supply to 160,000 people have been removed to date along with a capital investment of $32.7 million. Customer numbers have been increased by 31%, through enlarging service coverage improved tariff collection. Revenues have been increased by 65% without a rate rise, through service enhancement and improved billing. In 2004, a US$44 million five year investment plan was agreed with the regulator in return for a Peso 48 (US$15.6) per annum increase in water bills for all but the poorest 20% of its customers. Aguas de La Rioja The contract for the Province of La Rioja (population 280,198) was awarded to Aguas de La Rioja SA in 1999. From 1999-2002 customer connections increased by 27% from 34,952 to 44,414. From 1999-2002, monthly collection of bills rose from billing revenues rose 27% to 70% resulting in revenues improving by 40% without any tariff increases, while operational costs were reduced by 40%.

Aguas de La Rioja

Aguas de Salta Aguas de Corrientes

Total

Water coverage 89% 97% NA NA Customers 44,414 239,015 147,500 430,929 People served 186,539 1,015,814 634,233 1,836,586 Sewerage coverage 59% 66% NA NA Customers 29,093 158,739 110,076 297,908 People served 122,191 674,641 473,329 1,270,161 Revenues US$11.7 million US$41.0 million US$30.5 million US$83.2 million

Contact Details Name: Latin Aguas SA Address: Buenos Aries 766 (W3400BMH) – Corrientes,

Argentina Tel: +54 3783 430017 Fax: +56 3783 23989 Web: www.latinaguas.com Web: www.aguasdelarioja.com.ar www.aguasdesalta.com.ar Dr. Jorge Chamas (President)

AUSTRALIA PART 3: COMPANY ANALYSIS


AUSTRALIA UNITED GROUP LIMITED United Group specialises in industrial maintenance, facilities management, commercial property management services, manufacturing, fabrication and construction for the power supply and distribution, water and waste management, mining and mineral processing, oil, gas and LNG and telecommunications sectors. Its United KG subsidiary is involved in integrated facilities management, industrial maintenance and engineering construction. The company is active in Australia, New Zealand, the United Kingdom and Southeast Asia. In 2002-03, United KG gained contracts with Western Water Services and Sydney Water worth a total of A$150 million. In June 2004, United Group paid A$15 million for Thames Water Projects, a company covering Thames’ process engineering activities in Australia, Malaysia and Singapore. Thames Water Projects has a turnover of A$50 million and employs 110 staff, 60 in Melbourne, 20 in Kuala Lumpur and 30 in Singapore. The business was part of Thames Water’s international operations and is now called United KG Water Projects. The company dates back to as water treatment chemicals company operating in Australia in the 1920s which was acquired by Thames when it bought PW Worldwide in 1989. While most of Thames Water Project’s activities are for third parties, the acquisition includes TW’s industrial water outsourcing project in Victoria.

2000 Maffra 10 year BOT Water treatment The US$10.6 million contract is for an industrial water treatment facility in the state of Victoria. United Group aims to develop the division to concentrate on the direct management of water and wastewater treatment assets. The Group’s total water and wastewater order book is over $250 million. Projects being managed for other clients include the US$240 million contract for a major water treatment works and associated trunk mains, reservoirs and main distribution system in west Bangkok, Thailand. The project was completed, ahead of schedule in July 2004.

Y/E 31/03 (A$ million) 1999 2000 2001 2002 2003 Turnover 501.4 761.3 681.6 724.8 860.8 Operating profits 33.1 30.9 24.1 28.5 39.9 Net income 18.8 10.7 7.7 16.3 21.9 Earnings per share (A$ cents) 18.8 10.7 9.5 19.5 24.0

Contact Details Name: United Group Limited Address: Level 10, 2 Elizabeth Plaza,

North Sydney, NSW2060 Australia

Tel: (61 2) 9492 8888 Fax: (61 2) 9492 8844 Web: www.unitedgroup.com.au Web: www.ukgwaterprojects.com.au Ivan Deveson (Chairman) Richard Leupen (Managing Director and Chief Executive Officer) David Irvine (Chief Financial Officer)

AUSTRIA PART 3: COMPANY ANALYSIS


AUSTRIA AQUAPLUS Aquaplus is jointly held by Vienna Water (33%, owned by the city of Vienna), Porr Infrastruktur GmbH (33%, construction) and Österreichische Bundesforeste (33%, the Federal forestry company). It has been developed to allow Vienna Water to operate in the private sector for BOT contracts in Austria and Central and Eastern Europe. Aquaplus has two subsidiaries; Ariwa Abwasserreinigung im Waldviertel GmbH (Ariwa) and Aquasystems. Ariwa Ariwa was founded in 2001 for developing water and sewage treatment BOT contracts in Austria. Hat year, it gained the first sewage treatment BOT in Lower Austria, serving the city of Waidhofen an der Thaya. Construction was begun on September 21, 2001 and the facility entered service at the end of 2002, with the municipality commencing payments in March 2003. The sewage treatment plant has a capacity of 16,000PE with a capital cost of €4 million and an operational period of at least 25 years. Aquasystems Aquasystems DOO was founded for the Maribor wastewater treatment concession project in Slovenia. This concession operated by Suez, with Porr Infrastruktur being one of the main shareholders in Aquasystems. Slovenia

1997 Maribor 25 year concession 190,000 wastewater treatment Suez was the preferred bidder for the Maribor concession in 1997 and subsequently joined with Aquasystems. €30 million investment is needed and the concession project will generate a turnover of €8 million. There is an EBRD loan attached to the project. The population equivalent for the plant is 190,000 (equivalent to €29 per capita pa) and can be expanded to 285,000 at a later date. Construction started in June 2000, with the pre-treatment phase completed in June 2002 and the facility became fully operational in February 2004. The operational contract runs from 2004. Maribor is Slovenia’s second largest city. This was the first BOT wastewater treatment contract to be awarded in Central and Eastern Europe. Contact Details Name: Aquaplus Address:

Absberggasse 47 A-1103 Vienna Austria

Tel: Tel: + 43 (0)1 603 10 12 - 3917 Fax: Fax: + 43 (0)1 603 10 12 - 3920 Web: www.aquaplus.at Web: www.ariwa.at Dr. Rainer Wiedemann (General Manager) Bernhard Elsinger (Manager) Dr. Robert Nusser (Manager) Gerald Loew (Manager)



AUSTRIA EVN Energie-Versorgung Niderösterreich (EVN) is the regional power utility serving the province of Lower Austria. 51% is owned by the state government. In January 2001, EVN acquired Nösiwag from the state government for €87 million. The company was renamed EVN Wasser GmbH in 2001. The company has 16 supply areas and 75 reservoirs, with a storage volume of 197,000m³, as well as a 1,390km supply network. With the acquisition of WTE in 2003, ENV now provides water and wastewater services to 1.2million people in six countries.

Y/E 30/09 (€million) 1999 2000 2001 2002 2003 Water sales (million m 3) 21.9 24.1 23.4 24.0 26.0 Water revenues 16.0 17.5 17.7 18.7 21.4

EVN Wasser provides water services to 552 municipalities, or some 467,000 inhabitants, or around one-third of the Lower Austrian population. 131 industrial customers are also supplied. Nösiwag is the second largest Austrian water supplier behind the Vienna waterworks. In 2002, 24million m3 of water was supplied and has increased by an average of 14.3% pa over the past 35 years. EVN aims to expand EVN Wasser across Lower Austria (water supply), along with a planned entry into the end customer market. It is also anticipated that the sewerage and wastewater treatment markets will be addressed. In the longer term, other markets in Austria and internationally will be sought. In June 2002, EVN acquired 50 of Wiental-Sammelkanal (WISAK), which operates WWTWs in Wiental, Ludweis -Aigen, Großmugl and Niederhollabrunn in lower Austria. EVN has one contract outside Austria; DTV Rt. (51% held with Resonáor Kft of Hungary), providing water and wastewater services for 3,100 households (c10,000 people) in six municipalities in the Dunavarsány region of Hungary. Since the original contract was signed in 2001, two more municipalities have joined and negotiations are underway with a further six. At present, its international strategy is being limited to central and eastern Europe. EVN, profit and loss account

Y/E 30/09 (€million) 1999 2000 2001 2002 2003 Revenues 902.4 948.1 1,014.7 1,113.9 1,082.1 Pre-tax profits -301.1 127.4 121.0 137.6 145.4 Net profits -187.0 94.5 87.8 89.5 102.6 Earnings per share (€) -5.50 2.78 2.58 2.39 2.73

EVN, populations served

Country Water Sewerage Total Austria 467,000 0 467,000 Hungary 10,000 10,000 10,000 Germany 21,000 81,000 81,000 Slovenia 0 3,500 3,500 Croatia 0 750,000 750,000 Russia 0 650,000 650,000 Total - home markets 467,000 0 467,000 Total - international 31,000 1,494,500 1,494,500 Grand Total 498,000 1,494,500 1,961,500

WTE In July 2003, EVN acquired WTE Wassertechnik (WTEW) from Berlinwasser. WTEW has built wastewater treatment plants in Germany, Austria and Denmark along with Poland, Bosnia, Croatia, Lithuania, Russia, Slovenia and the Ukraine. By 2002, 69 sewage treatment plants had been constructed, serving 8.5million people. WTE has a turnover of €62.7 million, with a pre-tax profit of €6.6 million. WTE seeks to operate a BOOT model for construction contracts, handing over the facilities to a local partner after its construction. Germany

2002 Windeck 25 year BOOT 21,000, water & sewerage Windeck is in North Rhine Westphalia. The contract involves managing and operating the municipality’s water and sewerage services, including the construction of a new WWTW. The operational contract started in January 2003 and the construction phase runs to the end of 2005. €37 million will be spent on capital projects.



1993 Altenburg 10 + 10 year BOOT 60,000, sewerage

The city’s WWTW was constructed in two phases between 1993 and 1995, with a BOOT contract running to 2003. This contract was renewed for another 10 years in 2003.

2003 Langnese-Iglo 14 + 7 year O&M Industrial wastewater Langnese-Iglo GmbH Europe’s largest ice cream facility in Heppenheim. The WWTW handles 1,600m 3 of effluent per day, reducing its COD loading by 91%. Croatia

2000 Zagreb 28 year BOT 0.75million sewage treatment This is the largest sewage treatment concession award in central and eastern Europe to date, involving €270 million in capital spending. The project scope includes design, construction and operation of the wastewater treatment plant (1million PE) and the administration facilities, construction of the main collecting pipeline (9.8km) and coverage of main drainage canal (5.5km). The concession company, Zagrebacke otpadne vode d.o.o (ZOV), is formed by RWE Aqua (48.5%), WTE Wassertechnik GmbH (48.5%) and the City of Zagreb (3%). Construction began in July 2002 and will be completed between 2004 (mechanical treatment) and 2006 (biological treatment). On completion, the facility will have a PE of 1.5million. Russian Federation

1998 Moscow 11 year Build, O&M 0.25million sewage treatment A WWTW covering new housing estates in the district of South Butowo. The contract covers the construction of the facility and its operation until 2011.

2000 Moscow 12.5 year Build, O&M 0.40million sewage treatment A 140,000m³ per day WWTW for the Zelenograd area of Moscow. The O&M element of the contract runs until 2013. Slovenia

1998 Kranjska Gora 15 year Concession 3,500 sewage treatment This is a tourist area, which accommodated 258,000 visitors in 1999. The concession covers the complete sewerage system, including a new WWTW. In 2002, BOT contracts for sewerage were gained for the municipalities of Komenda and Bled. Contact Details Name: EVN AG Address: EVN Plazt, A-2344 Maria Enzersdorf, Austria. Tel: + 43 2366 200-0 Fax: + 43 2366 200-2030 Web: www.evn.at Web: www.wte.de Rudolph Gruber (CEO) Peter Layr (Director)

BELGIUM PART 3: COMPANY ANALYSIS


BELGIUM AQUAFIN NV Aquafin NV was founded in 1990 as a vehicle for developing a modern sewerage network for the Flanders region. By using private finance and taking on its own debt, less than 15% of the company’s €2.8 billion in capital spending has been passed on to the region. Aquafin is 51% held by VMW (the Flemish Regional Government), on behalf of VFM the regional environment ministry), 20% by Severn Trent Plc, with the balance being held by a variety of institutional investors. The company may seek to obtain a market listing, but this is seen as unlikely under present conditions. Aquafin, profit and loss account

Y/E 31/12 (€ million) 1999 2000 2001 2002 2003 Turnover 224.0 245.7 261.2 272.5 281.0 Operating profit 59.0 66.1 74.5 77.6 77.2 Net profit 10.3 11.2 11.6 11.5 11.7

In 1990, 29% of the region’s effluent was treated, typically, at facilities that failed to comply with their effluent discharge consents. 35% sewerage coverage was reached in 1995, with 57% coverage in 2002 and 60% by 2003. In 2003, Aquafin was responsible for the operation of 199 wastewater treatment plants, 791 pumping stations and 3,846km of sewerage pipes. The total treatment capacity of the plants was 4.9million PE, with an actual treatment of 3.8million PE, and for 3.3million people. Sewage treatment performance

(million m3/year) 1996 1998 1999 2000 2001 2002 2003 Pumped discharge 360 594 591 659 731 720 579 2o/3o treatment 339 523 537 598 652 649 548

A dry summer in 2003 materially decreased the liquid flows into the sewerage system, while increasing the concentration of effluents by more than 20%. Approximately 95% of the effluents received were subject to biological treatment. Aquafin, project development profile, 2002-03

(€ million) Projects, 2002 Cost, 2002 Projects, 2003 Cost, 2003 Completed 1,330 1,480 1,454 1,666 In progress 304 534 223 420 In preparation 578 759 598 767 Total 2,212 2,803 2,275 2,853

Projects worth €184 million were delivered during 2003. The corporate aim is for 73% treatment coverage by 2005 and 85% by 2015. Between 2003 and 2015 €1,868 million has been budgeted for stormwater handling (40%) and domestic sewerage and treatment (60%), including extending sewage treatment to a further 237,000PE. For the Flanders region as a whole, it is estimated that a further €7.44 billion will need to be spent on new sewage treatment works, along with upgrading and extending extant plant by 2015. In addition, €11.8 billion needs to be spend on the sewerage and storm sewerage infrastructure during this period. 8 plants with a PE of more than 10,000 are to be built by 2008 (total PE237,000), along with 26 plants with a PE of 2,000-10,000 to be built by 2008 (total PE135,000). The 2008 timetable means that the urban wastewater treatment directive target date of 2005 will not be met, mainly due to planning delays. Sewerage treatment works programme

Sewage treatment works 1994 1998 2000 2002 2003 Compliant 82 135 168 173 177 Derogated 15 8 5 15 13 Non-compliant 20 7 3 1 9 Total 117 150 176 193 199

Aquafin’s consulting arm, Aquaplus NV, is working on projects in Chile, the Czech Republic, Hungary and Poland and seeks to enter the market for BOT contracts in North Africa as well as central and eastern Europe.

BELGIUM PART 3: COMPANY ANALYSIS


Contact Details Name: Aquafin NV Address: Dijkstraat 8 B - 2630 Aartselaar,

Belgium Tel: +32 3 450 45 11 Fax: +32 3 458 30 20 Web: www.aquafin.be Ivo van Vaerenbergh (President) Luc Bossyns (MD)

BRAZIL PART 3: COMPANY ANALYSIS


BRAZIL SABESP In 1877, the Province of Sao Paulo granted a concession for the provision of water and sewage services to Companhia Cantareira de Agua e Esgotos. In 1893, the Province assumed responsibility for the provision of water and sewage services and formed the Reparticao de´Agua e Esgotos (Office of Water and Sewers), a Governmental agency. Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) was founded in 1973. The state water and sewerage company for San Paulo was partly floated on the Soma in November 1996 and promoted to the Bovespa exchange in June 1997. The Sao Paulo Government sold a further 19% of SABESP’s equity for BR 507 million (US$204 million) in May 2002 and now holds 71.5% of SABESP’s equity. The sale took place both on the Sao Paulo Bourse and the NYSE. Water and sewerage volumes (million m3 per annum)

Water provision 1999 2000 2001 2002 2003 Residential 1,156 1,177 1,157 1,205 1,199 Commercial 157 154 141 147 143 Industrial 34 34 31 31 31 Municipal 49 50 47 48 46 Other 394 317 322 339 346 Total 1,790 1,731 1,699 1,770 1,765

Sewerage 1999 2000 2001 2002 2003 Residential 862 873 868 914 919 Commercial 131 129 122 127 126 Industrial 28 30 27 28 29 Municipal 37 38 37 36 36 Total 1,058 1,070 1,054 1,105 1,110

Water provision, billed by region

Y/E 31/12 (million m3) 1999 2000 2001 2002 2003 Sao Paulo Metropolitan Region 924 933 903 936 932 Interior Region 307 315 310 327 487 Coastal Region 165 165 163 168 * Wholesale 394 318 322 339 346 Total 1,790 1,731 1,698 1,770 1,765

Sewage collection, billed by region

Y/E 31/12 (million m3) 1999 2000 2001 2002 2003 Sao Paulo Metropolitan Region 719 722 704 734 741 Interior Region 259 266 266 282 387 Coastal Region 80 82 84 89 * Total 1,058 1,070 1,054 1,105 1,110

* Interior and Coastal regions have been combined from 2003 Since 2004, a bonus scheme has been implemented to encourage domestic and commercial customers to minimize water consumption. This has made a material impact on water usage.

R$ million 2000 2001 2002 2003 Water – Retail 1,784 1,815 2,015 2,190 Water – Wholesale 184 204 230 262 Sewerage 1,365 1,397 1,586 1,756 Water & sewerage services 125 128 131 98 Total 3,458 3,544 3,962 4,308

BRAZIL PART 3: COMPANY ANALYSIS


SABESP – service coverage

1999 2000 2001 2002 2003 Water Billed Volume (million m 3) 1,396 1,413 1,376 1,431 1,419 People served (million) 19.1 N/A 21.1 25.0 25.1 Sewerage Volume (million m 3) 1,058 1,070 1,054 1,105 1,110 People served (million) 15.0 15.5 N/A 16.8 17.2

SABESP has 6.0million water connections and 4.5million sewerage connections. SABESP serves 31 cities in the area, along with six bulk water supply contracts. During 2003, SABESP collected 81% and 73% of all the sewage produced in the municipalities in which they operate in the Sao Paulo Metropolitan Region and the Regional Systems respectively, accounting for 78% of all the sewage produced compared with 76% in 2002. For 2003 approximately 60% and 65% of the sewage collected by SABESP in these regions, or 61% of the sewage collected by SABESP in the state, was treated at their treatment facilities and discharged to inland waters and the Atlantic Ocean. The company operates 428 sewage treatment facilities and seven ocean outfalls. SABESP, profit and loss account

Y/E 31/12 (R$ million) 1999 2000 2001 2002 2003 Turnover 3,236 3,356 3,435 3,767 4,110 Operating profits NA 1,412 1,309 1,306 1,477 Net income -235 521 216 -651 833 Earnings per share (R$) -8.37 18.32 7.59 -22.84 29.26

The company provides water and sewerage services to 368 of the 645 municipalities in the state, and has added 34 more municipalities since 1997. SABESP’s service area covers 25.1million out of the state’s 36.4million people, 21.3 directly served and 3.8 via bulk water sales. R$4.3 billion is being spent between 2004 and 2008 on service extension. It is understood that distribution losses within the company’s service area are appreciably below the national average of 50% for urban areas. Contact Details: Name: Companhia de Saneamento Basico do Estado de Sao Paulo Address: Rua Costa Carvalho, 300,

Pinheiros, Sau Paulo SP 05488-900 Brazil

Tel: +55 11 3388 8000 Fax: +55 11 3813 0254 Web: www.sabesp.com.br Mauro Guilherme Jardim Arce (Chairman) Fernando Carvalho Braga (Vice Chairman) Dalmo Do Valle Nogeuira Filho (President/CEO)

CANADA PART 3: COMPANY ANALYSIS


CANADA AQUATECH WATER MANAGEMENT SERVICES INC Aquatech Water Management Services (AWMS, a separate entity from Aquatech International Corp of Pennsylvania, USA) was founded as SAUR’s Canadian subsidiary in 1981. SAUR sold the company to its management and private investors in 2002. In 2000, Aquatech had water and wastewater revenues of CAN$7 million. The company served 768,000 people for wastewater and 88,500 for water provision. Some 65% of the private water sector in Canada is controlled by the company. At the time, Aquatech operated 25 wastewater treatment works, with a capacity of 680,000m 3 per day, or a PE of 2,266,666, along with 13 drinking water plants with a total capacity of 74,200m3 per day. The company has two principal operating subsidiaries:

• Aquacers (jointly operated with Simo Management and Gest Eau of Canada) has operated the sewerage and wastewater treatment services for Longueuil since 1993.

• Gestion Eaux-Richlieu (jointly operated with P. Bailargeon Ltd of Canada) has operated the sewerage and

wastewater treatment services of Saint-Jean-Sur-Richelieu since 1998. Contracts gained and retained since 2002 include: Régie d'Assainissement de Boischatel (sewerage pumping and wastewater treatment) City of Lévis (sewerage pumping and wastewater treatment for the city of Saint-Nicolas) City of Longueuil (sewerage pumping and wastewater treatment) Creg Quay Corporation (sewerage pumping and wastewater treatment) Municipality of Compton (water, sewerage pumping and wastewater treatment) Contact Details Name: Aquatech Water Management Services Address: 101, Roland-Therrien blvd.,

Suite 110 Longueuil Québec J4H 4B9 Canada

Tel: +1 48 (450) 646-5270 Fax: +1 48 (450) 646-7977 Web: www.aquatech-inc.com Jean-Guy Cadorette (General Manager) Jean Pierre Azzopardi (President) Yves HF Bélanger (Director, Administration and Finance)

CHILE PART 3: COMPANY ANALYSIS


CHILE AGUAS ANDINAS Aguas Andinas (AA), formerly EMOS, is Santiago’s water supply and sewerage company. AA serves 5million people via 1.15million customer connections. Water services to Santiago were formally organised in 1861 with the first capital works starting in 1865. AA was founded in 1977 and turned into a limited company in 1989. In June 2000, Santiago had an estimated population of 6.102million.

Aguas Andinas, Number of Connections

1999 2000 2001 2002 2003 Water 1,152,000 1,180,400 1,303,880 1,331,851 1,363,760 Sewerage 1,120,600 1,149,600 1,268,457 1,296,004 1,327,824

42.0% of the equity of AA was sold to Inversiones Aguas Metropolitana Ldta (IAM, Suez-Lyonnaise and Aguas de Barcelona) for US$957 million, and a further 9.2% for US$178 million, valuing the company at US$2,180 million. Suez sold 30.1% of IAM to Agbar in July 2004 for €139 million. After a poorly received flotation in 1999, a second share sale in 2002 has resulted in 13% of the equity now being held by outside investors. 35.0% of the equity currently remains in government hands, which is currently planning to sell this to institutional inves tors for US$400 million. Aguas Andinas, service development Revenues are expected to double in the next ten years because of service expansion. At present its charges are amongst the lowest fees in Latin America. The average drinking water tariff is CLP208 per m3 and sewerage is CLP118 per m 3, which is increasing by CLP47 per m 3 due to the expansion of sewage treatment. Currently, 100% of the population is served with piped water and 99% by mains sewerage and 72% of sewage effluents are treated, compared with 3% in 2000. Service expansion in recent years has concentrated on adding new connections as Santiago’s population has risen. 7,800 connections were added in 2003 through the award of six new concessions Investment in facilities, 2000-03

CLP million 2000 2001 2002 2003 Aguas Andinas 32,013 88,612 92,330 72,513 Aguas Cordillera 0 5,085 4,548 4,607 Aguas Manquehue 0 0 896 1,830 Total 31,013 93,697 97,774 87,590

During 2003, 71% of capital spending was for sewage treatment and 11% for sewerage. Water distribution accounted for 8% and bulk water treatment 4% with 6% going on information technology and monitoring.

Investment programme (US$ million) 2001-05 Water treatment 98 Water distribution 110 Sewerage 38 Sewage treatment 563 Other services 23 Total 832

CLP325 billion was spent on capital spending between 2000 and 2004, compared with CLP85 billion in 1995-1999. The distribution network has been increased from 11,130km to 12,033km since 2000. The sewerage network increased from 8,906km to 9,720km during the same period. The Farfana sewage treatment works handles sewage from 3.3million people, placing it amongst the five largest WWTWs in the world. Sewage treatment works

Facility Completion date Cost (US$ million) Capacity (m3/s) Treatment coverage El Trebal 2001 150 4.4 23.2% La Farfana 2003 315 8.8 71.8% Los Nogales 2009 210 6.6 100.0%



The US$700 million sewage treatment programme involves the construction of 13 smaller WWTWs for 610,000 people in outlying areas. The water recovered from these facilities will be used to irrigate 130,000Ha of farmland. Aguas Andinas, profit and loss account

Y/E 31/12 (CLP million) 1999 2000 2001 2002 2003 Turnover 74,211 106,052 123,863 150,870 168,398 Operating profits 20,850 45,049 53,051 62,485 71,199 Net income 13,258 41,320 47,639 54,113 59,659 Earnings per share (CLP) 2.40 6.75 7.79 8.84 9.75

2000 Santiago Aguas Cordeillera 280,000, water & sewerage Enersis sold Aguas Cordeillera to AA for US$193 million in June 2000. The second highest bidder was Biwater at US$179 million. Aguas Cordillera serves 88,000 customers (280,000 people) in the Vitacura, Las Condes and Lo Barnechea districts of Santiago.

2000 Santiago Aguas Manquehue 13,000, water & sewerage 50% of Aguas Manquehue was acquired in 2000 and the remaining 50% in 2003. Contact Details Name: Aguas Andinas SA Adress: Av. Presidente Balmaceda 1398, Casilla No. 1537, Santiago 420, Chile Tel: +56 2 694 2001 Fax: +56 2 694 2641 Web: ww.emos.cl Web: www.aguasandinas.cl Ruque Gistau Gistau (Chairman) Jean-Carlos Fontana (Vice Chairman) Jose Bague Prats (CEO and General Manager)



ANTOFAGASTA PLC Antofagasta PLC/Antofagasta Minerals SA is a Chilean company, listed on the London Stock Exchange that specialises in mineral extraction (especially copper and molybdenum) and road and rail logistics. In November 2003, Antofagasta gained a 30 year concession to operate the water rights and facilities in the Antofagasta Region of Chile previously controlled by Empresa de Servicios Sanitarios de Antofagasta SA (ESSAN). The concession is intended to complement Antofagasta’s existing transport and mining activities in the region, including the water distribution business already operated by the Railway. Antofagasta Plc, profit and loss account

YE 31/12 (US$ million) 2000 2001 2002 2003 Turnover 766.1 769.5 863.1 1,076.2 Operating Profit 219.2 110.0 176.8 357.2 Net profit 138.2 62.1 96.8 180.7 EPS (US cents) 70.0 31.4 49.0 91.5

The concession contract was signed and control of the assets was transferred on 29 December 2003 by Aguas de Antofagasta SA, the company’s newly created water management subsidiary. The cost of the concession was C$ 116.6 billion (US$193.8 million). Under the concession contract, certain assets and liabilities were transferred to Aguas de Antofagasta by way of a US$27 million sale. Other assets (mainly water rights and infrastructure) were transferred by way of concession and will devolve to ESSAN at the end of the 30 year period. Aguas Antofagasta’s ESSAN serves some 454,000 residents, with 100% drinking water coverage, 99% sewerage coverage and 99% wastewater treatment. Aguas Antofagasta consists of two businesses, an unregulated business supplying mines and other industrial users and a regulated business supplying domestic customers. For Antofagasta, the company will focus both on the future development of mining operations in the region and the expected increased demand in domestic consumption. ESSAN, profit and loss account

YE 31/12 (US$ million) 2002 2003 Turnover 39.0 41.4 Pre-tax profit 20.6 19.8 Net profit 17.4 17.7

Distribution losses are currently in the region of 25% and are being targeted for reduction. Non-regulated services are being expanded with plans to supply mining water to BHP’s Spence project near El Tesoro and to Falconbridge’s Collahuasi project in Ujina, near the border with Bolivia. Contact Details Name: Antofagasta PLC Address: 5 Princes Gate,

London SW7 1QJ, United Kingdom

Tel: + 44 20 7808 0988 + 562 377 5145

Web: www.aminerals.cl Web: www.antofagasta.co.uk A A Luksic (Chairman) J-P Luksic (Deputy Chairman) P J Adeane (Managing Director) Alejandro Rivera (Chief Financial Officer)



CONSORCIO FINANCIERO SA Consorcio Financiero is one of the largest non-banking financial services conglomerate in Chile and the largest insurer in the market. The company offers life insurance, general insurance, annuities, home loans, investments, stock brokering and consumer loans. The group currently manages assets of more than US$3 billion. Consorcio Financiero is privately held by Juan Hurtado and Eduardo Fernandez. In 2003, the company became Chile’s third largest water operator through two acquisitions. ESVAL was the first Chilean water company to be privatised when AWG and Chile’s Enersis acquired a controlling stake in the company in 1998. In July 2001 AWG bought out Enersis’s 72% stake in the Aguas Puerto joint venture for US$131 million, bringing its total investment in ESVAL’s equity to £142 million. In October 2003, AWG’s 44.7% stake in Esval was acquired by Consorcio Financiero for US$82 million. In May 2004, Aguas Puerto transferred its final 5.04% stake in Esval to investment fund administrator Moneda Asset Management. 10% of ESVAL is traded on the Santiago Stock Exchange. The company serves the city of Valparaiso and the adjacent coastal region. In November 2003, Esval’s Aguas del Valle gained a 30 year concession to operate Essco through a US$89.7 million bid.

ESVAL ESSCO Region V IV People served 1,400,000 512,000 Coverage – water 99% 100% Coverage – Sewerage 91% 95% Coverage – Sewage treatment 94% 95% CP (billion) 2003 Revenues 56.3 15.7 2003 Operating Profit 24.4 5.4 2003 Net Profit 12.8 4.5

Esval has invested US$260 million in developing its assets since it was privatised, including US$134 million on wastewater collection and treatment and US$126 million for improving drinking water treatment and distribution. This has included developing sewage treatment plants located in the area of the Aconcagua Valley (La Ligua, La Calera, Limache, Quillota, San Felipe, and Los Andes). Esval plans to invest US$120 million between 2004 and 2006, US$68 million on increasing drinking water capacity and US$52 million towards wastewater treatment works, with a further US$25 million to be invested in Aguas del Valle in the same period. The projects to be carried out in the next few years are designed to anticipate Region V's population growth for the next 20 years. US$25 million will be invested in Aguas de Valle between 2004 and 2006. Essco will invest US$15 million on wastewater treatment, and US$10 million on water treatment and distribution. Works will include extending sewage underwater outlet pipes farther out to sea in Coquimbo and Los Vilos, which currently discharge 80 meters and 40m, respectively, from the shore. Contact Details Name: Consorcio Financiero SA Address: Av. El Bosque Sur 180,

Las Condes Santiago Tel: + 230 40 00 Fax: + 230 40 50 Web: www.consorcio.cl Juan Bilbao Hormaeche (Chairman) Patricio Parodi (Chief Executive Officer) Gustavo Gonzalez (General Manager, ESVAL)



SACI FALABELLA SACI Falabella is the leading chain of department stores in Chile that has diversified into areas such as financial services. It is 88.7% held by businesses associated with the Solari family. In June 2004, Aguas Nuevas gained ESSAT Tarapaca region), ESSAR (Araucania region) and ESMAG (Magallanes region), the final three 30 year concessions for Chile’s 12 water and wastewater regions . Aguas Nuevas is owned by various members of the Solari Family including 33% by Falabella’s Inversione Megeve. This is the first time the family has operated outside business areas directly related to their retail-related activities. Regions I, IX and XII were the smallest and most rural of the concession areas. The Solari interests bid US$172 million for the three concessions, compared with US$160 million by JP Morgan (USA) the only other final bidder. In the case of ESSAR, it is known that US$75 million in capital spending will be needed, because of the poorly developed sewage treatment services. This will also apply for the more rural ESMAG. ESSAT and ESSAR also need significant capital spending in order to upgrade their water distribution systems. ESSAT, ESSAR and ESMAG: Company characteristics

Company ESSAT ESSAR ESMAG Region I IX XII Purchase price (US$ million) 74.2 61.3 35.2 Population 409,000 581,000 147,000 Customers 106,900 157,839 41,790 Revenues (CHP billion) 18.8 14.7 5.9 Drinking water production (million m3 pa) 37.6 48.4 10.8 Distribution losses 36% 38% 13% Water coverage 100% 100% 100% Sewerage coverage 96% 90% 100% Wastewater treatment coverage 100% 13% 13%

Flabella, profit and loss account Y/E 31/12 (CHP billion) 1999 2000 2001 2002 2003 Turnover 628.6 675.8 802.6 857.9 1,063.1 Operating profits NA NA 78.1 100.8 116.9 Net profit 49.8 52.8 54.2 70.6 98.4 Contact Details Name: SACI Falabella Address: Rosas 1665,

Santiago, Chile

Tel: (56 2) 380 2000 Web: www.falabella.com Sr. Reinaldo Solari (Chairman) Sr. Pablo Turner Gonzales (CEO) Sra. María Luisa Solari (Director)

CHINA PART 3: COMPANY ANALYSIS


CHINA ANHUI GUOZHEN GROUP The Anhui Guozhen Environmental Protection Energy-Saving Technology Company is owned by the Anhui Guozhen Group Ltd. Co. This is a privately held company based in Anhui Province that has net assets of RMB400 million. The wastewater treatment plant serving the Xinhui District of Jiangmen (Guangdong Province) opened in October 2003. The district invested RMB 36 million (€4 million) for the land and a supporting network of sewage pipelines. Anhui Guozhen Environmental Protection is responsible for the WWTW’s RMB42 million investment and operation. The city will only have to pay RMB0.67 (€0.07) for each tonne of sewage treated, compared with RMB1.2 (€0.13) it would have spent if it had conducted its own investing and management. The municipality had estimated that the 80,000m³ per day WWTW would have cost RMB280 million to develop and finance. Xinhui had a population of 255,000 in 1994. Contact Details Name: Anhui Guozhen Group Address: 441 Huangshan Road

Hefi, Anhui China

Tel: 0551-364 2422 Fax: 0551-3643547 Web: www.ahgze.com.cn Jian Xingchao (Chief Engineer) Wu Hao (Vice President) Ms Dvan (Manager)



BEIJING CAPITAL GROUP The Beijing Capital Group was founded in 1995 through the amalgamation of 17 state owned enterprises in Beijing. It was partly floated on the Shanghai Stock Exchange in 2000. In 2003, its property arm Beijing Capital Land was partially floated on the Hong Kong Stock Exchange and the company aims for a £1.5 billion flotation in the medium term, raising funds for water and wastewater projects amongst others. In 1999, the company entered the water sector when it acquired the Gao Bei Dian Water Treatment Plant from the Beijing Municipal Water Treatment Company. Since 1989, the Group has invested over RMB6 billion in urban infrastructure development and has average returns of 9-12% on its water activities. Nine water contracts had been signed during the first four months of 2004 and this is expected to increase to at least 12 by the year end. It’s 72.6% held subsidiary Beijing Capital Corporation (BCC) was listed on the Shanghai Stock Exchange in 2000. BCC has invested in a series of water joint ventures and has started to operate its own water contracts, generating revenues of MB14.8 million in 2003. Beijing Capital Co

YE 31/12 (RMB million) 2000 2001 2002 2003 Turnover 157.3 168.0 191.8 222.9 Operating profits 38.3 -7.6 56.0 45.9 Other profits 413.5 512.4 463.2 394.3 Net profits 418.6 482.0 460.4 403.5 Earnings Per Share (RMB) 0.42 0.44 0.41 0.37

Three joint ventures have been signed to date: Beijing Water Co., Ltd. A joint venture established in 2002 by Beijing Urban Drainage Group (51%) and Beijing Capital Co., Ltd (49%), Beijing Water Co., Ltd is focuses on city sewage treatment. Its registered capital is RMB4.02 billion, ranking first in China. Its two subsidiary factories, Gaobeidian Sewage Treatment factory and Jiuxianqiao Sewage Treatment Factory, have a capacity of 2.1million m3 per day, accounting for 81% of sewage handling capacity in Beijing. Ma'anshan Capital Water Co., Ltd. Established by Beijing Capital Co. Ltd, which has invested RMB90 million and holds 60% of the equity. The total capacity of the joint venture is 0.45million m3 per day and the current capacity is 0.21million m3 per day. The company is developing water treatment works in eastern China: Shandong, Jiangsu, Zhejiang and Anhui. Beijing Capital VW Investment Co., Ltd. This com pany was founded in 2003 following a strategic agreement signed in 2001 and has a registered capital of US$30 million; Beijing Capital Co., Ltd (51%) and Veolia Water invested (49%). This was the first Sino-Foreign investment company in this sector. In December 2003, the JV announced that it was paying RMB2.94 billion for a 40% stake in the Shenzhen Water Group (SWG). SWG treats 1.672million m3 per day, 93% of Shenzhen City’s drinking water, along with a sewage treatment capacity of 1.082million m3 per day, accounting for 95% of the City’s total. Contact details Name: Beijing Capital Group Address: 3rd Floor, Jinguan Centre,

No 8, Beisanhuan Road East, Chaoyang District, Beijing,

100028 China Tel: 86-010-6468-3366 Fax: 86-010-6468-9020 Web: www.capitalgroup.com www.beijingcapital.com.cn Lin Bao (Chairman) Liu Xiaoguang (General Manager and Deputy Chairman) Cao Gui Jie (Deputy General Manager)



BEIJING SOUND ENVIRONMENTAL INDUSTRY GROUP Beijing Sound Environmental Industry Group (Sound Group) is a privately owned company. It was founded in 1994 and had a turnover of RMB200 million in 2000, employing 180 senior engineering staff. Sound Group started as an engineering company specialising in water and waste treatment hardware. Currently the company is developing activities for municipal water supply and municipal sewage treatment contracts and for industrial clients. In June 2001, Sound Group signed agreements to build sewage treatment plants in 11 Chinese cities. These include Golmud in Qinghai Province, Jinshan District (of the Shanghai Municipality), Jianzhou, Jianyin and Huanggang and Xiangtan in Hubei Province. The eleven sewage treatment plants will have a combined daily handling capacity of more than 1.7million tonnes. This is equivalent to serving approximately 5million people. In total, the eleven facilities will require a total investment of about RMB2 billion (US$240 million). The BOT contracts signed are to last for 25 years. The company expects the facilities to pay off the project financing after ten years. These will be the first privately operated sewage treatment facilities in China, where currently 80% of urban wastewater is untreated. Contact Details: Name: Beijing Sound Environmental Industry Group Address:

No.15 Building 4 Block, Anhuili Chaoyang District, Beijing, P.R. China

Tel: +86 (10) 6491 6666 2209 Fax: +86 (10) 60 50 4766 Web: www.soundgroup.com Wen Yibo (President)



CATHAY INTERNATIONAL GROUP Cathay International Holdings (CIH) is a Hong Kong and UK based company founded in 1991. It specialises in hotels, toll roads, power plants and through its minority held subsidiary Cathay International Water (CIW) it has diversified into a number of water treatment plant operation contracts. In 1996, STIC (now part of Sembcorp of Singapore) acquired a 18% stake in Cathay International’s water activities for US$45 million. This stake was sold back to CIW and Cathay International (Overseas) Holdings for US$44.8 million in June 2003. Cathay International Water's shareholders include the Santander Group (since 1991), Nomura/Jafco (since April 1996), UBS (Switzerland, since May 1997) and JP Morgan Securities Asia (since May 1998). Cathay International Water Contracts in China :

4 water plants in Guangzhou City with a total capacity of over 2,000,000 m3/day 2 water treatment plants in Binzhou City with a total capacity of 80,000 m3/day 2 water plants in Jiangmen City with a total capacity of 500,000 m 3/day 7 water treatment plants in Jinan City with a total capacity of 800,000 m3/day

Cathay International Group, Profit and loss account

YE 31/12 (US$ million) 2001 2002 2003 Revenues 34.0 32.6 9.9 Pre-tax Profits -11.3 -64.1 -4.1 EPS (p) -0.2 -12.2 -2.9

Contact Details Name: Cathay International Holdings Limited Address: Angel Road, Brookdale House,

Stonehill Business Park, London N18 3LD United Kingdom

Tel: +44 20 8 8071020 Fax: +44 20 8 8843528 James Buchanan (Chairman) Wu Zhen Tao (CEO) Patrick Sung (FD)



CHEUNG KONG INFRASTRUCTURE HOLDINGS LTD. Cheung Kong Infrastructure (CKI) is 85% held by Hutchinson Whampooa Limited and was partly floated on the Hong Kong Stock Exchange in 1996. CKI invested HK$69 million in the HS$140 million Yueyang water treatment works project serving Yueyang City (Hunan Province) in 1998. This stake was sold for a HK$11 million profit in 2003. In addition, CKI’s CK Life Sciences has developed a series of bioremediation product applications; WonderTreat™, for treatment of municipal wastewater, contaminated surface water and industrial wastewater. CKI acquired the entire equity of AquaTower of Australia in March 2004. In April 2004, CKI acquired Cambridge Water Plc of the UK from Spain’s Union Fenosa for £51.4 million. Union Fenosa had in turn acquired Cambridge Water for £57 million in 1999. Cheung Kong Infrastructure, profit and loss account

YE 31/12 (HK$ million) 2000 2001 2002 2003 Turnover 2,567 2,316 1,872 1,613 Operating profits 1,116 346 958 1,043 Other profits 3,006 3,893 3,644 3,579 Net profits 3,228 3,323 3,326 3,349 Earnings Per Share (HK$) 1.43 1.47 1.48 1.49

Australia: AquaTower AquaTower was formed in 2002 to provide potable water to 50,000 people in four regional towns in Victoria. CKI was one of the two original investors in the 25 year BOT project and in 2004 acquired the outstanding 50% held by Abigroup of Australia. United Kingdom: Cambridge Water The Cambridge University and Town Waterworks was founded in 1853 and was floated as Cambridge Water Plc in 1996. Cambridge Water, profit and loss account

Y/E 31/12 (£million) 1999 2000 2001 2002 2003 Turnover 16.00 15.57 13.81 14.84 14.74 Operating profit 4.64 3.20 4.25 3.99 4.09 Pre-tax profit 3.77 1.57 2.53 2.51 9.80

Cambridge Water supplies water to 298,000 people (119,700 customers) in the city of Cambridge and certain surrounding districts, with sewerage services being provided by Anglian Water Plc. The population in the service area has increased by 17,000 since 1995. The water and gas and electricity activities were spun off into separate companies and the latter activities were sold to Scottish and Southern Electricity in 2003 for £4 million. 60% of customers have water meters, compared with 51% in 2002 and demand for metering is rising by 4% pa. Contact Details Name: Cambridge Water Plc Address:

41 Rustat Road, Cambridge CB1 3QS

Tel: +44 1223 706050 Fax: +44 1223 214052 Web: www.cambridge-water.co.uk Michael Halstead (Chairman) Stephen Kay (Managing Director) Contact Details Name: Cheung Kong Infrastructure Address: Cheung Kong Centre, 2 Queen’s Road,

Central, Hong Kong Tel: 852 2122 3986 Fax: 852 2501 4550 Web: www.cki.com.hk Victor Li Tzar Kuoi (Chairman) Kam Hing Lam (MD)



CITIC PACFIC LTD CITIC Pacific is the Hong Kong arm of CITIC, China’s leading investment company. It was floated on the Hong Kong Stock Exchange in 1996. 50.5% of the equity is held by private and institutional investors, 29% by CITIC’s CITIC Hong Kong and 20.5% by the management. Cathay International Group, Profit and loss account

YE 31/12 (HK$ million) 2000 2001 2002 2003 Turnover 16,044 17,251 22,316 26,180 Operating profits 2,481 2,207 2,583 1,132 Other profits 2,307 2,058 2,411 1,190 Net profits 3,291 2,110 3,875 1,305 Earnings Per Share (HK$) 1.56 0.96 1.77 0.60

Citic expects to be involved in five water and waste management projects in Shanghai, Hangzhou, Guangzhou and Jiangsu by the end of 2004. It is anticipated that the Jiangsu project will involve a total investment of HK$1 billion. Zunyi 2004 Zunyi 35 year concession Water treatment Citic Pacific holds 75% of the asset and the 25% of the operational companies (CGE (Zunyi) Water Treatment Co Ltd.), with CDGE (Veolia) holding the remaining 25% and 75% respectively. Zunyi is in Guizhou Province. The contract involves acquiring the extant facilities for RMB152 million and has a total cost of RMB200 million. These consist of the Nanjiao and Beijiao water treatment works, each having a capacity of 100,000m 3 per day. The asset company is to pay the operational company a set of fees up to an annual cap of RMB51 million. Citic anticipates a 15% return on its investment in the project. Contact Details Name: Citic Pacific Limited Address:

Citic Tower, 1 Tim Mei Avenue, Central, Hong Kong

Tel: 852 2820 2111 Fax: 852 2877 2771 Web: www.citicpacific.com Larry Yung Ghi Kin (Chairman) Henry Fan Hung Ling (Managing Director) Peter Lee (Deputy Managing Director)



GLOBAL GREEN TECH GROUP Global Green Tech Group (GGTG) is a Hong Kong listed company specialising in a range of cosmetic and surfacant products for domestic and industrial use. Golden Idea is a private biotechnology company in China engaged in the research and development of wastewater treatment systems as well as the design, development, sales and installation of environmental protection equipments other than wastewater treatment. Global Success Properties Ltd, a unit of GGTG, currently owns 8.0 % of Golden Idea. In September 2002, GGTG signed a letter of intent with Golden Idea Bio-technology Engineering Group Ltd and Guangxi Liuzhou City Investment and Construction Development Co Ltd for a joint investment in two sewage treatment plants. GGTG and Golden Idea are to acquire from Guangxi Liuzhou City Investment the rights for the development and operation of two sewage treatment plants at Liuzhou in China. The development and operation rights will last not less than 25 years, with a proposed investment of US$61.35 million. HK$100 million was earmarked for expanding the plant in 2002. The total project will cost HK$480 million. The two plants will serve over 800,000 commercial and residential users in the city of Liuzhou. The technology development and construction of these two plants are expected to take two years and the plants are scheduled for the commencement of operations by the end of 2004. Global Green Tech Group, profit and loss account

FY 31/12 (HK$000) 1999 2000 2001 2002 2003 Turnover 106.55 188.73 341.04 674.07 633.59 Net profit 27.68 54.54 83.18 144.63 92.24 Earnings per share (HK$) 13.84 27.03 30.75 28.88 18.41 Dividend per share (HK$) 0.00 0.00 5.00 5.00 4.00

Contact Details Name: Global Green Tech Group Address: Unit 13 5/F Vanta Industrial Centre,

21-33 Tai Lin Pai Road Kwai Chung, N.T. Hong Kong

Tel: +852 2522-2811 Fax: +852 2973-0033 Jim Lau (Chairman) Henry Chan (CFO)



GUANGDONG INVESTMENT LTD Guangdong Investment Ltd (GDI) is a property and investment company controlled by the municipality of Guangdong’s GDH Limited (58%) and Guandong Trust (11%). Following heavy losses in 1998 and 1999, the company has been restructured to concentrate on utilities, infrastructure and property. The traditional utility activities were in power generation. In December 2000, GDI acquired 81% of GH Holdings for HK$3.96 billion as part of a refinancing exercise. GH Holdings owns 99% of WaterCo, a company that operates the assets for the transfer of treated bulk water to Hong Kong. WaterCo was corporatised in April 2000 and supplies water to parts of Shenzen and Donnguan in Guangdong Province along with supplying 75% of Hong Kong’s drinking water under a 30 year non-exclusive contract (from August 2000.) This is equivalent to serving 5million people. The latter contract accounts for 90% of WaterCo’s revenues. A water piping project (Phase IV renovation project) increased the system’s capacity from 1,743million m3 pa to 2,423million m3 at the start of 2004 at a cost of RMB4.7 billion. A refinancing of the water operations in 2003 reduced financing costs by approximately HK$800 million pa. Guangdong Investment Ltd, profit and loss account

Y/E 31/12 (HK$ million) 1999 2000 2001 2002 2003 Turnover from water supply 0 4 2,728 2,832 2,958 Group turnover 4,995 4,947 7,272 6,737 5,164 Group operating profits -985 -373 2,129 1,851 2,170 Pre-tax profit -1,561 -1,145 650 530 1,673 Net profits from water supply 0 -6 317 114 829 Net income -2,377 -1,356 286 194 1,107 Earnings per share (HK$) -0.957 -0.544 0.043 0.023 0.194

1999-2002 figures have been restated, due to changes in internal accounting policy procedures and the refocusing of the company’s activities. Under the original agreement, the agreed supply for 1995 was 690million m3, increasing by 30million m3 per annum to the designed maximum capacity of 1,100million m3 pa by 2008. In return for an interest free loan granted by Hong Kong to Guangdong Province in 1998, the agreed increase in water supply was cut from 30million m3 per annum to 10million m3 per annum from 1998, reducing the overall volume provided between 1998 and 2004 by 560million m 3. Year, Million m3 pa 2001 2002 2003 Water to Guangdong 608 718 940 Water to Hong Kong 790 800 810 Total Water Sales 1398 1518 1740

The volume of water sold to Dongguan rose by 79.8% in 2003. In August 2003, negotiations were resumed over the Water Project’s tariff structure. Despite the lowered rate of growth in water deliveries since 1998, demand has continued to be significantly lower than the agreed volume. In 2001, water used was 61million m3 below the agreed volume, falling to 56million m3 below the agreed volume in 2002. This meant that the Water Supplies Department had to pay HK$188.19 million in 2001 and HK$172.76 million in 2002 for water that it did not use. Huang Huahua, the Governor of Guangdong Province is considering imposing a package of a tariff cut of 20% and more flexible supply arrangements in response to the continued weakness of the Hong Kong economy. GDI is pressing for the tariffs to be increased. Contact Details Name: Guangdong Investment Ltd Address: 27-29/F Guangdong Investment Tower,

148 Connaught Road, Central District, Hong Kong SAR, China

Tel: +852 2860 4368 Fax: +852 2528 4386 Web: www.gdi.com.hk Li Wenyue (Chairman) Zhang Hui (MD) Paul Wang Man Kwan (CFO)



JIANGXI HONGCHENG WATERWORKS CO The Jiangxi Hongcheng Waterworks Co was partly floated on the Shanghai Stock Exchange in June 2004. The IPO raised RMB264 million, RMB256 million of which is to be used in expanding the water supply network through three projects designed to expand supply capacity from 900,000m 3 per day to 1.2million m3 per day by 2007. Electricity accounted for 38% of its production costs in 2003. Water is charged at RMB0.553 per m3 and has been fixed at this level for two years, with limited scope for further increases. The company is responsible for 85% of Nanchang’s water supplies. Jiangxi Hongcheng Waterworks Co, profit and loss account

Y/E 31/12/(RMB million) 2001 2002 2003 Turnover 108.17 116.25 127.21 Operating Profit 41.9 43.9 44.0 Net Profit 24.5 25.3 25.5 EPS (RMB) 0.273 0.281 0.283

Contact Details Name: Jiangxi Hongcheng Waterworks Co Address: 292 Yanjiang Road South

Nanchang Jiangxi 330001 China

Tel: 86 791 523 5057 Fax: 86 791 522 6672 Zheng Mingtan (Chairman) Lui Zhoing (President) Kou Jianguo (CFO)



NANHAI DEVELOPMENT COMPANY LIMITED Nanhai Development Company Limited (NDC) supplies drinking water and designs and installs water supply systems in Nanhai and surrounding areas in Guangdong Province. The company was listed on the Shanghai Stock Exchange in December 2000. 36.5% of its equity is held by the Nanhai Water Supply Group. The municipality of Nanhai has 1.10million people. The company seeks to raise water supply to 1.32million m3 per day. Nanhai Development Company Limited, profit and loss account

Y/E 31/12 (RMB million) 1999 2000 2001 2002 2003 Turnover – Water supply 9.4 123.5 208.0 232.4 253.7 Total turnover 30.0 130.9 217.1 232.4 253.7 Operating profit 4.8 62.8 96.2 99.3 115.0 Net profit 19.2 32.0 73.2 72.1 64.1 EPS (RMB) 0.13 0.22 0.35 0.35 0.31 DPS (RMB) 0.00 0.25 0.20 0.20 0.20

Contact Details Name: Nanhai Development Company Limited Address: 22F Jianhang Building,

Nanhai Avenue, Nanhai District, Foshan, Guangding, 52820 China

Tel: +86-757-8628-0996 Fax: +86-757-8623-8565 Xie Yuzhi (Chairman) Ye Er (Vice President) Feng Chenggui (President) Chen Huixia (Financial Controller)



NWS HOLDINGS LTD NWS is the Hong Kong Stock Exchange listed services arm of the New World Development Company. The company was listed on the HKSE in 1997. NWS has been involved in then water sector in China since 1993 through Sino French Holdings (Hong Kong) its 50-50 joint venture with Suez Ondeo. NWS Holdings Ltd, profit and loss account

YE 31/06 (HK$ million) 2000 2001 2002 2003 Turnover 150 134 125 5,770 Operating profits -70 -51 -22 257 Other profits 138 397 238 1,316 Net profits 66 276 144 1,213 Earnings Per Share (HK$) 0.26 0.69 0.50 1.39

Tianjin 2004 Tanggu District 35 year concession 850,000 water Tianjin Tanggu Sino French Water Supply Co Ltd is a 50-50 joint venture between the Tianjin municipality and SFHD. The concession was announced in April 2004 and will involve an investment of RMB470 mil lion for the handling a total of 310,000m 3 of water per day. The contract will enter service in the second half of 2004 and will be immediately cash generative. Sanya 2004 Sanya 35 year concession 300,000 water The Sanya Sino French Water Supply Company is to invest RMB320 million in the construction and management of a 310,000m 3 of water per day water treatment plant serving Sanya, a city in Hainan province. The joint venture is held by SFH and the city’s Hainan Tianya Water Industry Holding Company. NWS’s Water Treatment and Waste Management segment holds stakes in a water treatment plant in Macau, 19 water treatment plants in 15 cities, a micro-filtration equipment manufacturing plant and a wastewater treatment plant in Mainland China. Total water treatment capacity at the start of 2004 was 3.95million m 3 per day. Contact Details Name: NWS Holdings Ltd Address:

New World Tower 2, 18 Queen’s Road, Central, Hong Kong

Tel: 852 2131 0600 Fax: 852 2131 0611 Web: www.nwsh.com.hk Henry Cheng Kar Shun (Chairfman) William Doo Wai-Hoi (Deputy Chairman)



SHANGHAI INDUSTRIAL HOLDINGS Shanghai Industrial Holdings Limited (SIHL) is a broadly based infrastructure, logistics and technology company, which is 58% held by the Shanghai municipal government. The company was partly floated on the Hong Kong Stock Exchange in 1996. In 2003, the company decided to enter the Chinese water and sewage treatment BOT market. The company plans to invest a total of RMB10 billion by 2006 in operating water supply, sewage treatment and sewerage networks, with the objective of becoming one of the top three water services companies in the Chinese market. Shanghai Industrial Holdings, profit and loss account

YE 31/12 (HK$ million) 1999 2000 2001 2002 2003 Total turnover 3,301 2,961 3,199 3,380 2,826 Operating profits 1,130 1,315 1,490 1,452 1,647 Net income 1,011 1,135 1,203 1,126 1,259 Earnings per share (HK$) 1.14 1.27 1.34 1.22 1.34

In August 2003, SIHL formed a RMB500 million 50:50 joint venture with the state-held China Energy Conservation Investment Corporation (CECIC). The joint venture’s China Water and Sewage Treatment Company and Zhong Huan Water Treatment Construction Limited Corporation started operations in November 2003. China Water and Sewage Treatment subsequently signed heads of agreements with Xiamen Water Services Group and Zhenjiang New Area Administrative Commission in Jiangsu province for water services investment projects. Total investment in the two projects will exceed RMB1 billion. China Water and Sewage Treatment has in turn set up a joint venture with the Xiamen Water Services Group to operate the principal water supply and sewage treatment facilities in Xiamen. The city is one of China’s four Special Economic Zones and contract covers a water supply capacity of 1.0million m3 per day and a sewage treatment capacity of 514,000m 3 per day. This operation of contract is currently subject to a competitive tender. A second joint venture has been formed with the Zhangjiang New Area Administrative Commission in Jiangsu Province for the exclusive right to operate water supply and sewage treatment facilities in Zhenjiang New Area. China Water and Sewage Treatment is expected to invest by 2006 a total of RMB250 million in a 100,000m 3 per day waterworks BOT project, a 60,000m 3 per day sewage treatment plant TOT (Transfer-Operate-Transfer) and BOT project, and a sewerage network project for water supply and sewage collection in the Zhanjiang New Area. In April 2004, SIHL gained contracts to develop a 300,000m 3 per day water treatment plant serving Nanjing and a 400,000m 3 per day water treatment plant serving the cities of Zhenjiang and Zhangjiang. Contact Details Name: Shanghai Industrial Holdings Ltd. Address:

Harcourt House, 39 Gloucester Road, Hong Kong, HK

Tel: 00852 86 21 6356 4899 Fax: 00852 86 21 6356 4880 Web: www.sihl.com.hk Cai Lai Xing (Chairman) Lu Ming Fang (CEO) Lu Da Yong (Deputy CEO)



SHANGHAI MUNICIPAL RAW WATER CO LTD The Shanghai Municipal Raw Water Co. Ltd. (SMRW) abstracts water from the Yangtze and Huangpu rivers for treatment at the Shanghai municipality’s water treatment stations. The company builds and operates the pumping stations, canals and reservoirs necessary for the bulk water provision to the city. 52% of SMRW's shares are held by the Shanghai State Assets Management Bureau. In addition, SMRW supplies bulk water to Veolia Water’s 2002 Shanghai Pudong contract. Shanghai Municipal Raw Water Co., profit and loss account

YE 31/12 (RMB million) 1999 2000 2001 2002 2003 Water supply turnover N/A 800.4 745.4 695.4 713.0 Water treatment turnover N/A N/A N/A 80.3 240.1 Total turnover 910.7 808.9 750.5 780.3 969.7 Operating profits 494.7 464.9 393.2 371.9 450.4 Net income 440.1 406.1 387.8 400.7 429.4 Earnings per share (RMB) 0.257 0.220 0.210 0.213 0.228

Contact Details Name: Shanghai Municipal Raw Water Co. Ltd. Address:

5/F, 812 Sichuan Road North, Shanghai, 200085, China.

Tel: +86 21 6356 4899 Fax: +86 21 6356 4880 Liu Qiang (Chairman) Shoupei Wu (President) Bai Lei (Financial Controller) Gu Yuliang (Chief Engineer)



SUZHOU NEW DISTRICT HI-TECH INDUSTRIAL CO LTD Suzhou New District Hi-Tech Industrial Co. Ltd. (SNDHT) is responsible for the development and operation of water, road, gas and power services for Suzhou's Hi-Tech Industrial Development Zone. 24.5% of its shares were floated in August 1996, and the company is currently 48.6% held by Suzhou New District Economic Development Group. Non-real-estate turnover fell from RMB57.3 million in 2000 to RMB28.8 million in 2001 and RMB62.7 million in 2002. There are 400 facilities and 100,000 residents in the area. Demand for water is currently in excess of 300,000m 3 per day, provided by the city. The dedicated Suzhou Xinning Water Works was opened in 2000, providing 150,000m 3 per day, which can be doubled at a later date. Suzhou New District Hi-Tech Industrial Co. Ltd., profit and loss account

Y/E 31/12 (RMB million) 1999 2000 2001 2002 2003 Turnover 536.2 438.8 540.5 737.8 771.7 Operating profits 194.0 140.2 116.6 157.6 198.8 Net income 149.2 108.1 84.9 94.1 108.7 Earnings per share (RMB) 0.353 0.260 0.189 0.206 0.238

Contact Details Name: Suzhou New District Hi-Tech Industrial Co. Ltd. Address: 6/F Jinshi Building, 12 Sishan Road,

New District, Suzhou, Jiangsu Province 215011, China

Tel: +86 512 809 6283 Fax: +86 512 809 9281 Web: www.sndht.com.cn Wu Youming (Chairman) Liang Jianhua (Vice Chairman) Wei Hua (President) Zhuang Liangbao (Finance Director)



WUHAN SANZHENG INDUSTRY HOLDING CO LTD Wuhan Sanzheng Industry Holding Co. Ltd. (WSI) is responsible for the abstraction, treatment and distribution of drinking water to the city of Wuhan and the surrounding area. 25% of the company’s shares were floated in April 1998, 71% being held by the Wuhan Water Business Group Co. Ltd. Wuhan Sanzheng Industry Holding Co. Ltd., profit and loss account

Y/E 31/12 (RMB million) 1999 2000 2001 2002 2003 Water supply 185.0 183.2 180.0 169.9 159.4 Drainage 56.1 51.9 51.5 44.9 0.0 Turnover 241.1 321.2 227.6 211.4 159.4 Operating profits 127.6 119.0 119.7 90.9 52.2 Net income 170.1 147.7 132.7 78.4 30.1 Earnings per share (RMB) 0.417 0.355 0.301 0.178 0.070

Contact Details Name: Wuhan Sanzheng Industry Holding Co. Ltd. Address: 5th Floor, Donfang Commercial Building,

Fazan Avenue, Wuhan 430023, Hubei, China

Tel: +86 27 8560 0546 Fax: +86 27 8587 7108 Web: www.whkg.com.ch Chen Lqian (Chairman) Zheng Yaoguang (President) Zhou Xianwen (VC)

FRANCE PART 3: COMPANY ANALYSIS


FRANCE BOUYGUES Société d’Aménagement Urbain et Rural (SAUR) is part of the Bouygues Group, one of the leading French construction companies. Bouygues acquired SAUR in 1984. SAUR was founded in 1933, making it the last of the major French water companies and SAUR has always been associated more with small towns and rural municipalities than either Suez or Veolia Environment SA (VE). Until 1997, SAUR was 45% held by Bouygues. However, following the 1997 acquisition of Cise from St. Gobain, Bouygues’ holding in SAUR increased to 83%. In 1999, Bouygues decreased its stake in SAUR to 73% and in January 2001, Bouygues assumed 100% ownership of SAUR. Bouygues SA, profit and loss account Y/E 31/12 (€million) 2000 2001 2002 2003 Turnover 19,060 20,473 22,247 21,822 Operating profit 812 876 1,058 1,238 Net profit 215 344 666 450 Earnings per share (€) 0.60 0.95 0.93 1.34 Dividend per share (€) 0.36 0.36 0.36 0.50

SAUR Revenue Breakdown SAUR (€million) 2000 2001 2002 2003 France 1,531 1,607 1,682 1,719 Western Europe 347 329 279 209 Eastern Europe 45 54 33 30 Africa 442 481 516 469 Asia/Pacific 5 6 6 0 USA & Canada 9 13 0 0 Rest Of World 2 2 2 18 Total turnover 2,388 2,494 2,514 2,448 Operating profit 116 85 108 88

75% of SAUR’s 2003 turnover was in water activities (€1.8 billion), being impacted by the 2003 sale of SAUR’s activities in England. In 1994, the company decided to stop trying to compete against Suez and VE in France outside the southern and western areas where it has established a significant presence. Instead the company is seeking to gain international water contracts. Outside Africa, SAUR continues to have a relatively low profile in most international markets, especially when compared with VE and Suez-Lyonnaise. In contrast to Suez and VE, SAUR has to date found most of its success in Africa and has been mainly winning operations and management contracts (O&M), which in many cases, it hopes will evolve into full concessions. In 2004, Bouygues announced that it was considering selling SAUR. This is not the first time such an announcement has been made. SAUR, population served Country Water Sewerage Total France 6,000,000 6,000,000 6,000,000 Argentina 1,300,000 883,000 1,300,000 Central African Republic 1,100,000 0 1,000,000 China 3,500,000 0 3,500,000 Côte d’Ivoire 6,900,000 1,500,000 6,900,000 French Overseas Territories 130,000 0 130,000 Guinea 350,000 0 1,500,000 Italy 1,200,000 2,400,000 3,300,000 Mali 115,000 0 115,000 Mozambique 2,500,000 0 2,500,000 Poland 510,000 0 510,000 Scotland 0 400,000 400,000 Senegal 3,800,000 0 3,800,000 South Africa 60,000 56,000 60,000 Spain 2,210,000 700,000 2,210,000 Zambia 300,000 300,000 300,000 Total – Outside France 23,975,000 6,239,000 27,525,000



Country Water Sewerage Total Global total 29,975,000 12,239,000 33,525,000

France In France, SAUR provides water and sewerage services to 6.0million people. SAUR enjoyed contract gains in Brive, Aix les Bains, Brainon and Nimes during 1996-97. Cise served approximately 3.0million people, mainly for water alone and contributed F3.2 billion in 1996. SAUR France provides 7,000 communities with water supply and sewerage services through 3,200 water and sewage treatment works. Unlike VE and Suez, the company has not been subjected to allegations about its pricing and contract procurement policies in France. Customer numbers rose by 1.5% and prices by 1.5% in 2000. In September 2000, Cise was renamed SAUR France. UK - SAUR Water Services Plc SAUR Water Services (Great Britain) Plc was sold to MacQuarie Bank of Australia in September 2003.

1999 Dalmuir, Glasgow 25 year PFI BOT 600,000, PE sewage treatment Scotia Water (SAUR UK, Stereau (SAUR), Innisfree, Taylor Woodrow, Barr & Halcrow) are to construct the replacement of Glasgow West’s sewage treatment works built in 1904. The new Dalmuir facility will offer an increased effluent handling capacity and an appreciably higher degree of treatment. Stereau will be paid €21 million for hardware and SAUR will receive €3 million pa for the operational life of the contract. Italy SIGESA acquired the water services activities of Fiat SpA in 1998. SAUR's Sigesa acquired 71% of Crea in February 2000 with the remaining 29% being held by Italmobiliare SpA. The acquisition values Crea at €67 million. Crea supplies water to 13 regions. In 2003, SAUR acquired 26.5% of Umbria Acque the ATO serving 460,000 people in the city of Perugia.

Population served (million) Sigesa Crea Combined Water 0.35 0.85 1.20 Wastewater 0.45 1.85 2.40

The new group serves a total of 2.8million people. Turnover increased from €21 million in 1999 to €48 million in 2000 and €58 million in 2001. The gas activities have been divested. Spain In Spain, SAUR holds 32% of Aguas de Valencia (AgVal). SAUR's EMALSA (€46 million unconsolidated turnover in 2003), Gestagua (€29 million turnover in 2003) and AgVal serve water to 2.2million people and sewerage to 700,000 people (see separate entry for AgVal). EMALSA is a JV run between SAUR, Endesa of Spain and the Las Palmas municipality, which provides water to a total of 420,000 people. EMALSA and Gestagua had a consolidated turnover of €45 million in 2003. AgVal’s water provision contract for Valencia was renewed for 50 years in 2002. It has been in operation since 1904 and covers 780,000 people. Gdansk, Poland. SAUR Neptune Gdansk, a water and sewerage management JV with the municipality of Gdansk, started in late 1992 and runs until 2010. The venture is charging Zl3.95 (US$0.184) per m³ for drinking water and Zl3.45 (US$0.162) per m³ for sewerage services to 470,000 people in the city and 510,000 people overall. The increase in fees has been 36% below the rate of inflation. SAUR holds 50.99% of the company. Water quality has moved from 8% EU compliant in 1992 to 87% by 2000, while distribution losses have fallen from approximately 55% in 1992 to 10% in 1999, with water consumption falling by 43%. STWs now operate at secondary level and are to be upgraded to tertiary level standard in line with the UWWTD. The contract generated sales of €30 million in 2003. South Africa

1999 Dolphin Coast 30 year concession 56,000 water & sewerage The Borough of Dolphin Coast in Ballito is one of the main tourist resorts in South Africa and is experiencing rapid growth both in its population and its tourism development. The concession is to be operated through SAUR’s Siza Water subsidiary. US$172 million of investments are to be made during the life of the concession. Turnover was €1.9 million in 2001. Argentina

1998 Mendoza 95 year BOT 1.3million water & sewerage



Bouygues (32%), Enron (32%) and Italgas (4.5%) acquired Obras Sanitarias de Mendoza from Mendoza municipality for US$132.7 million. Enron sold its stake to South Water SA of Argentina in 2004. The contract will serve 280,000 clients in total and generated a €68 million turnover in 2001 against US$55 million in 1997. Because of the Pes o crisis revenues fell to €20 million in 2002 and €18 million in 2003. During 1998, the billing collection rate improved from 80% to 90% as the consortium introduced more professional operations management procedures. Mendoza has 1.6million inhabitants with 291,000 water connections serving 1.3million people, and 210,000 connections to the sewerage network serving 883,000 people. Capital spending of US$180 million to 2015 will concentrate on service expansion and the upgrading and expansion of water and sewage treatment facilities. West Indies and Reunion Island Water provision to 130,000 people in Guadeloupe and Martinique, both former French territories. Guinea

1989 Conakry 10 year lease 350,000 water management Operations and management for water provision to all cities through SEEG (jointly held with VE). Central African Republic

1991 Urban areas 15 year concession 1.1million water management Operations and management of all water services in urban areas through SODECA. Senegal

1996 Urban areas 10 year lease 3.8million water management Operations and management for water provision services to 54 towns and cities (1.8million outside Dakar) through its 62.83% stake in Senegalaise Des Eaux. Turnover was €66 million in 2003. Côte d’Ivoire

1987 Abidjan 20 year concession 6.9million water & sewerage SODECI has the O&M contract for water and sewerage services for Abidjan, the capital city. This is a renewal of the original 1959 concession. 6.9million people are provided with water services, along with 1.5million for sewerage. SAUR holds 48.9% of SODECI. Turnover was €74 million in 2003. Zambia 2000 Copper belt O&M 300,000 water & sewerage

The copper belt covers industrial towns in the north of Zambia. Mozambique 1999 Major cities 5 + 15 year BOT 2.5million water provision

A concession linked to US$117 million of donor funding. SAUR holds 38.5% of Aguas de Mozambique, along with IPE-Aguas de Portugal (31.5%) and the Mazi-Mozambique consortium holds the remaining 30%. The concession covers water provision services to the Mozambique capital of Maputo, the country's second city of Beira and major provincial capitals of Quelimane, Nampula and Pemba. It also commercialises water services in Maputo's neighbouring industrial city of Matola and Beira's neighbouring city of Dondo. In the longer term, the contract will cover some 5million people.

Mali 2000 Urban areas 20 year concession 115,000 water provision A JV between SAUR International (39%) and IPS (Aga Khan Fund for Economic Development, 21%), with the Government holding the remaining 40% has been awarded the concession to operate Energie de Mali (EdM). EdM had a €36 million turnover in 2003, compared with €96 million in 2001 and is responsible for water distribution (€26 million in 2001) to 68,000 customers. Currently 8% of the population is connected to the water network, a figure which will be increased to 24% by 2020. 15,000 new connections have been made to date. €610 million is to be invested in EdM. The contract will eventually cover 800,000 people.



China SAUR’s subsidiary Shanghai Fengxian SAUR Water (SFSW) is responsible for the company’s activities in China. 2001 Shanghai Fengxian 28 year concession 700,000 water provision Shanghai Fengxian is a district to the south-west of Shanghai. The plant, operated by SFSW, has a production capacity of 100,000m 3 per day and supplies drinking water to 700,000 people. SFSW is equally owned by SAUR International and a local investment company, and is involved in leakage loss detection across the district's distribution network. Under current conditions, the 28-year contract has aggregate sales of approximately €84 million and generated sales of €7 million pa. 1996 Harbin 28 year BOT and O&M 2,800,000 water provision This is a 0.225 million M3 per day water treatment plant construction plus management project, which is being operated jointly with the Harbin Water Company. Harbin has a total population of 2.8million. In 1999, Harbin SAUR Water was the first company in the Chinese water sector to be awarded ISO 9000 certification by an international organisation. Other Operation and Management contracts In Central and Eastern Europe, SAUR is gaining a reputation for working with Governments and municipalities on consulting projects, which have led to market breakthroughs in Poland and Bulgaria, where O&M and management contracts have been awarded. SAUR aims to gain full concessions in these countries when market conditions allow. Moscow, Russia: SAUR International has for many years maintained close relations with Mosvodokanal, Moscow's state-owned water company, in charge of supplying water and wastewater services to greater Moscow (12million inhabitants served). In 1994 Rossa was created, held by SAUR International (51%) and Mosvodokanal (49%), which runs a state-of-the-art water quality laboratory for the public utilities of Moscow and other towns in Russia, as well as for industry. Contact Details Name: Bouygues SA

Address: Challenger, 1, av. Eugène Freyssinet, 78061 St-Quentin-Yvelines Cedex, France

Tel: +33 1 44 30 60 32 11 Web: www.bouygues.fr Martin Bouygues (Chairman and CEO) Michel Derbesse (COO) Olivier Poupart-Lafarge (CFO) Contact Details Name: SAUR Address: Atlantis, 1 av Eugene Freyssinet, 78061

St-Quentin-Yvelines Cedex, France Tel: +33 1 30 60 22 60 Web: www.saur.com Oliver Bouygues (Chairman, SAUR) Philippe Marien (CEO, SAUR) Herve Le Bouc (COO, SAUR)



SUEZ SA Suez SA is the second largest water and wastewater company in France, but is the world’s leading international player in terms of the number of people served through its water and wastewater operations. The company has gained many of its contracts via contacts made through the water and sewerage engineering design and build projects carried out by its Degrémont subsidiary. Degrémont is currently operating in 40 countries and has worked in 70 countries over the past 30 years. Suez believes that 1billion people receive drinking water from its treatment plants. The acquisitions of Nalco and Calgon of the USA in 1999 were designed to build upon this strategy and to expand its industrial services activities. 2003 has been marked by a reversal of this expansion strategy as part of a debt reduction strategy, resulting in the end of six major contracts to date. Suez, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Turnover 31,462 34,617 42,359 46,784 39,622 Operating income 2,932 3,778 4,064 3,708 3,205 Net income 1,453 1,919 2,087 -863 -2,165 Earnings per share (€) 1.89 2.01 2.12 -0.87 -2.18 Dividends per share (€) 0.60 0.66 0.71 0.71 0.71

Société Lyonnaise des Eaux et de l’Eclairage was founded in 1880, making it the third oldest private sector water company in France. Major contract gains at the outset included Cannes (1880), Barcelona (1881), Dunkirk (1902) and Casablanca (1914). In turnover terms, the company was traditionally one of the smaller French multi-utility service and construction companies. This has been changed by the mergers carried out in 1990 and 1997, the former with Dumez SA of France (construction) and the latter with Compagnie Financiere Suez SA of Belgium (power and waste management). The former was to ensure that La Lyonnaise was too large for Bouygues SA to bid for and the latter to create a multi-utility at least equal to VE, its traditional rival. Suez - Highlights 1880: Société Lyonnaise des Eaux et de l’Eclairage founded 1914-46: Activities in Morocco, Tunisia, Togo, Congo & New Caledonia 1947: Electricity activities in France nationalised 1958: 300,000 subscribers in France 1972: Acquisition of Degrémont 1980-90: Enters Spain, UK & USA for water provision 1990: Merger with Dumez SA 1991: Acquisition of SDI 1996: Acquisition of Northumbrian Water Plc for F7.4 billion 1996: Buys out Eau et Force SA 1997: Merger with Compagnie Suez 1997: Buys out Degrémont SA 1998: Acquisition of Browning Ferris International 1999: Acquisition of Nalco and Calgon, buy back of Browning Ferris’s stake in SITA 2000: Lyonnaise des Eaux organised into three divisions 2001: S-LDE renamed Suez, LDE renamed Ondeo 2002: Creation of Environmental Division (Ondeo and SITA) 2003: Partial divestment of Northumbrian, other contracts handed back 2004: Partial divestment of EMOS, Puerto Rico contract handed back From 1914 to 1946, Société Lyonnaise provided water services in Morocco, Tunisia, Togo, Congo and New Caledonia. These were nationalised in 1946. In 1972 the company sought to re-enter the international market through the acquisition of Degrémont. Contracts and acquisitions were gained in Spain, the UK and USA between 1980 and 1990, along with the acquisition of SDI in France in 1991. By 1993, the company served 40million customers (25.5million outside France). Since then, Suez increased its international activities fourfold, through major contract gains, the 1996 acquisition of Northumbrian Water Plc, the acquisition of Aquas Andinas in Chile and acquisitions in the USA. Prior to the merger with Suez, Lyonnaise des Eaux had some 860 subsidiaries, reflecting the complexity of operating a utility via a large number of local contracts built up through contract awards and acquisitions. Compagnie Financiere Suez SA has been of more strategic importance with regard to power (Tractabel & Electrabel) and waste management (Watco) than the water markets. Some small contracts, supplying water to 300,000 people have been integrated into Suez’s portfolio of international contracts. The table below outlines Suez’s breakdown of the global population served and its main contract gains since 1984.



Year Million Contract gains 1984 33 0 France & Spain only 1985 34 1 Macao 1986 34 1 Natal (South Africa, O&M) 1987 34 2 Warsaw (USA) 1988 36 1 Essex & Suffolk Water Plc (UK) 1989 36 2 Montecatini Terme (Italy) & Taiping, (Malaysia) 1990 36 0 There were no contract gains this year 1991 36 4 Fiestole (Italy), Gibraltar & Edmonton (Canada) 1992 37 11 South Africa (O&M), USA, Italy, China & Malaysia 1993 47 10 South Africa (O&M), USA, Argentina, Mexico, Germany & Malaysia 1994 53 11 USA, Czech Republic, Me xico & Hungary 1995 55 9 Czech Republic, Hungary, China, Brazil & Colombia 1996 57 16 USA, Colombia, UK, Germany, Australia 1997 82 17 USA, Bolivia, Colombia, Argentina, Morocco, Hungary, Turkey, China,

Indonesia & Philippines 1998 89 16 USA, Colombia, Uruguay, Germany, China, Indonesia & Australia 1999 100 16 USA, Mexico, Chile, Germany, Norway, Slovakia & Italy 2000 108 10+ Chile, China, Cameroon, Brazil, Germany & Korea 2001 110 5+ Korea, China, Chile, Ireland 2002 131 25+ Taiwan, Canada, China, Mexico, Puerto Rico, Jordan, USA 2003 121 3+ Italy 2004 117 3+ Mexico, Russia

International water and wastewater services accounted for 30% of consolidated water services turnover in 1994 and 1995, rising to 65% by 2001. International activities have contributed at least 75% of the water services’ net earnings in recent years, the exceptions being in 2001 and 2002, due to the Argentinean Peso crisis. Suez, water and sewage services

Service Measure 2002 2003 Water provided Million m 3 pa 7,492 10,849 Process water Million m 3 pa 77 47 Sewage & effluent treatment Million m 3 pa 2,480 2,396 Water coverage People within contract area 89% 93% Sewerage coverage People within contract area 79% 78% Water network efficiency Water reaching customers 71% 81%

In terms of developing its infrastructure and services, the table above shows that a year of consolidation can produce real progress in the performance of continuing contracts. Ondeo, water activities profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Services – France 2,116.8 2,202.7 2,298.5 2,300 2,600 Services – International 2,850.7 3,660.6 3,932.1 4,100 3,900 Services – Total 4,967.5 5,863.3 6,230.6 6,400 6,500 Conditioning & treatment 543.4 2,629.3 2,946.1 N/A N/A Engineering 782.7 863.0 911.0 800 900 Total turnover 6,293.6 9,063.4 10,087.7 7,200 7,500

The 2002 figures are net of Northumbrian Water (UK) and Nalco. In 2002, the water and waste management activities were regrouped into Suez Environment Local Services (SELS, municipalities) and Suez Environment Industrial Services (SEIS, industrial services outsourcing). 2003 & 2004’s years of consolidation: activities ceased

2003 Location Contract Population served Canada Halifax Wastewater O&M 380,000 UK England Northumbrian Water Plc 6,296,000 USA Atlanta Water O&M 2,000,000 Vietnam Thu Duc Bulk water BOT 1,000,000 Total 9,676,000

2004 Location Contract Population served Colombia Bogota Wastewater BOT 1,500,000 Puerto Rico Puerto Rico Water & wastewater O&M 3,900,000 Total 5,400,000



Overall, exit strategies have differed. The Halifax contract was handed back to the municipality and subsequently re-emerged in a different form, while in Puerto Rico and Atlanta the contract was terminated by mutual consent. The Vietnam contract ended after a perceived change in strategy by the Government. Suez sold 75% of its holding in Northumbrian Water (Ondeo Services UK) in order to deconsolidate NWL’s €3.1 billion net debt. Bogota unilaterally ended the Saltire contract. Despite various problems, the Jakarta, Buenos Aries and Manila contracts continue to be operated by Suez. After the partial divestment of Northumbrian Water, Suez Environment Local Services (SELS) Water’s European return on capital employed has increased from 9% to 13.5%, with a 2002 pro-forma turnover of €3.6 billion. However, the figures are not strictly comparable due to the capital-intensive nature of the sector in England and Wales and the deconsolidation of Northumbrian Water’s debt. In Europe, the emphasis is currently on organic growth and gaining contracts in Central and Eastern Europe (where EU subsidies can be mobilised). The three priority markets are the Central and Eastern European Czech Republic, Hungary and Slovakia. In September 2003, Suez Ondeo sold Ondeo Nalco to a US based consortium of the Blackstone Group, Apollo Management L.P., and Goldman Sachs Capital Partners for US$4.35 billion. Nalco and Calgon were acquired for US$4,157 million and US$406 mill ion respectively in 1999. Suez, populations served by country

Country Water Sewerage Total Europe Belgium 300,000 0 300,000 Czech Republic 2,165,000 2,165,000 2,165,000 France 17,000,000 9,000,000 17,000,000 Germany 272,000 642,000 642,000 Hungary 2,255,000 255,000 2,255,000 Ireland 0 220,000 220,000 Italy 2,740,000 2,740,000 2,740,000 Russian Federation 1,000,000 0 1,000,000 Slovakia 150,000 150,000 150,000 Slovenia 0 190,000 190,000 Spain * 11,440,000 13,250,000 15,000,000 The Americas Argentina ** 10,900,000 7,350,000 10,900,000 Bolivia 1,400,000 850,000 1,400,000 Brazil 1,650,000 1,650,000 1,650,000 Chile 5,420,000 5,300,000 5,420,000 Colombia 0 0 0 Mexico 5,330,000 2,530,000 7,500,000 United States 4,850,000 3,360,000 7,550,000 Asia Pacific/Pacific Rim Australia *** 3,000,000 35,000 3,035,000 China & Macao *** 12,900,000 0 12,900,000 Indonesia 3,800,000 0 3,800,000 Malaysia 1,565,000 0 1,565,000 Philippines 4,300,000 500,000 4,300,000 South Korea 0 900,000 900,000 Taiwan 3,000,000 0 3,000,000 Rest of the World Cameroon 5,300,000 0 5,300,000 Jordan 2,500,000 2,500,000 2,500,000 Morocco 2,800,000 300,000 2,800,000 South Africa 700,000 280,000 700,000 Turkey 535,000 535,000 535,000 Total outside France 90,272,000 45,702,000 100,367,000 Global total 107,272,000 54,702,000 117,367,000

* Except where stated, via Aguas de Barcelona ** Via Aguas Argentinas and allied consortia *** Figures revised to take into account bulk water projects only serving part of each city Alliances and JVs Ondeo - Lend-Lease Pty: Australian JV (with an unnamed third partner) formed in 1991. Marketing vehicle for gaining the bulk water supply contract for Greater Sydney in 1993. The JV has been extended into South East Asia.



Sino French Holdings: A 50/50 JV with Hong Kong’s New World Development Corporation, a company that is also actively involved in waste management projects in Hong Kong. SFH is used for all of Suez’s contracts in China and Macao. TESCA: A JV with Bufete International and Bancomer serving Mexico. Ondeo and poverty reduction In 2003 Ondeo provided water to 46.5million people in developing economies, including 8.7million people below the poverty line worldwide. This includes 2.5million in South Africa, where they are within 200m of a standpipe. 7million people have been connected to piped water supplies through service extensions by Suez. France Suez has been VE’s chief competitor in France (and globally) more or less since 1880. By 1958, Suez had 300,000 subscribers in France. The 1972 acquisition of Degrémont SA saw the company move from straightforward service provision to a more broadly based design, build, operate and transfer contract approach. Suez acquired SDI in 1991, gaining 3% of the French water market or some 1.5million people. By 2001, Suez provided 17million people with water and 9million with sewerage services, where is has since remained. The sewerage market is growing at an appreciably faster rate than the water market. The company currently has 2,660 contracts with various municipalities and communes in France, representing 21% of the water and 14% of the sewerage market. In 1997, Suez acquired all the outstanding shares in Degrémont SA. It is likely that there may be increased pressure for the market to be seen to open up in the future. Since the ending of Droit d’entrée in 1995, Suez has not made appreciable progress in gaining new contracts in France. At the same time, with two exceptions, no contracts of material significance have been lost and most of its main contracts are not due for renewal until 2005. Spain Suez’s main involvement in Spain is through its 25.8% stake in Aguas de Barcelona’s (Agbar) equity, via its 51% holding of Hisusa SA, which in turn holds 47% of Agbar, along with its direct 1.5% holding in the company. Agbar’s activities are described in a separate entry. Belgium Suez’s Watco provides water to some 300,000 people in Belgium. Turnover rose from €29.6 million in 1998 to €47.7 million in 2000 before falling back to €40.5 million in 2001. Italy 1998 Aqua Toscane 30 year concession 40,000 water and sewerage

Suez holds 100% of Aqua Toscane, which concentrates on water provision for Fiezole, Montecatini and Ponte Buggianes, Florence in Tuscany. 1999 Arezzo 25 year concession 350,000 water and sewerage

In January 1999, a Suez-led consortium gained the first international tender award for a water and sewerage concession following the belated liberalisation of the market in the wake of the 1994 Galli law. Suez’s consortium holds 46% of the Nuove Acque, with 54% being held by public entities. The contract was formally signed in June 1999. The concession will in turn form a JV with the 37 communes involved. 2003 Pisa ATO privatisation 800,000 water & wastewater

A 45% stake in Acque SpA was acquired by the ACEA led consortium for €19.2 million. Acque is Tuscany’s ATO-2, serving 57 communes. The concession will generate €1.2 billion in revenues. 2003 Siena/Grosetto ATO privatisation 350,000 water & wastewater

A 40% equity stake in the Acquedotto de Fiora was acquired by the ACEA led consortium for €19.3 million, with a concession l ife of 25 years. The ATO-6 covers 56 communes and required some €433 million in capital spending.

2003 Florence ATO privatisation 1,200,000 water & wastewater The ACEA led consortium has acquired 40% of Publiacqua SpA, the holder of the 20 year concession to operate water and wastewater services for 50 communes in Tuscany’s ATO-3. Publiacqua had a turnover of €104 million in 2002 and net profits of €8 million. The consortium is contributing €60 million towards the €150 capital increase, with the municipalities paying the remaining €90 million. In conjunction with the privatisation, €300 million of Publiacqua’s revenues were securitised in order to pay for the capital increase and retire mature debt.



With ACEA and Ondeo controlling services for 2.7million out of the 3.5million people living in Tuscany, a rationalisation of these concessions is planned. Ireland

2002 Cork 22 year BOT 220,000 wastewater treatment The €70 million contract is part of a €270 million drainage and effluent treatment scheme for the city, which is due to be completed in 2004. The STW will have a 270,000m 3 capacity with a PE of 440,000, half being for industrial clients. Slovakia

1999 Trencin 20 year lease 150,000 water & wastewater Suez’s TVS was awarded the concession for 50 local authorities in October 1999. The contract requires €40 million in Capex, including construction of a new sewage treatment works, with €5 million pa in turnover at the outset. This is the first water services privatisation in the country. Slovenia

1997 Maribor 25 year concession 190,000 wastewater treatment In February 1997 Suez became the preferred bidder for the Maribor concession. €30 million investment is needed and the concession project will generate a turnover of €8 million. There is an EBRD loan attached to the project. The population equivalent for the plant is 200,000 (equivalent to €29 per capita pa). Maribor is Slovenia’s second largest city. Suez is the largest shareholder in the consortium (40% stake, including Degrémont as the constructor). Suez built a water treatment plant in Kopper in 1995. This was the first BOT wastewater treatment contract to be awarded in Central and Eastern Europe. Hungary With the gaining of the Budapest water provision contract, Suez’s total water services turnover in Hungary is now in excess of €85 million pa. The contracts serving Pecs and Kaposvar have a total turnover of €18 million pa. Suez has set up a holding company for all its Hungarian water activities.

1997 Budapest 25 year water dis tribution 2.2million water Suez and RWE Aqua controls all the shares of the management company and 25% of the equity of the asset management company. The management company formed by Suez (51%) and RWE Aqua (49%) has a 25% stake in Fövarosi Vizmuvek (FV) for US$82 million. Suez thus holds 13% of the asset company. FV has a €65 million turnover and employs 2,200 staff. The population currently served is 2.0million.

1995 Pecs 25 year lease 180,000 water & sewerage Suez holds 48% of the operating company, with the municipality holding the remaining 52%. 1995 Kaposvar 25 year lease 75,000 water & sewerage

35% of the operating company’s equity is held by Suez, with the municipality holding the remaining 65%. Czech Republic 1993 Brno (BVK) 25 year concession 420,000 water & sewerage 1994 Ostrava 30 year concession 330,000 water & sewerage 1996 South Moravia 25 year concession 350,000 water & sewerage

Suez holds 46% of BVK, the operating company in Brno. The concession was extended for a 25 year period in October 1999 (starting from 2000). The new concession involves upgrading the wastewater treatment plant to meet the EU’s UWWTD criteria. 1994 Karlovy Vary 25 year concession 120,000 water & sewerage

Karloy Vary is based in North Moravia. Suez holds 50% of VAK, the operating company’s equity. 1999 Ostrava area 15 year concession 0.75million water & sewerage

AWG and Suez acquired approximately 76% of the equity of Severomoravske Vodovody a Kanalizace AS (SmVAK) from the municipalities and small shareholders in the region during 1999. Suez holds 44% of SmVAK.



2000 Benesov 38,000 water & sewerage 2000 Davle 37,000 water & sewerage 2001 Sumperk Concession 120,000 water & wastewater

82% of Sumperska Provozni Vodohospoda Ska Spole Nost (SPVS) has been acquired by Ondeo Services. SPVS serves 40 towns and districts in the North East with a total turnover of €6 million pa. Ondeo serves 2.3million people in the Czech Republic and had a 2000 turnover of €138 million. Russian Federation

2004 Moscow 13 year BOOT 1million, water treatment EVN’s WTE awarded the BOOT contract to Degrémont in June 2004. The 275,000m 3 per day plant will provide potable water to South West Moscow from 2007 and be operated by Degrémont and WTE until 2017. Germany In Germany, Suez operates via Eurawasser. In 2002, Suez bought out Thyssen AG’s 51% stake in the JV. Eurawasser had a turnover of €75 million in 2001 and serves 600,000 people. 2004 Cottbus 25 year partnership 147,000 water & sewerage

Eurawasser acquired 28.9% of Lausitzer Wasser in February 2004. The town of Cottbus retains 50.1% of the company with the balance being held by local municipalities. Water will be supplied to 102,000 people in Cottbus and 45,000 in surrounding areas, along with sewerage services for 117,000 people. Revenues were €33.7 million in 2002, including €11.9 m illion in water supply and €15.7 million in wastewater. 1992 Rostock 25 year concession 302,000 water & sewerage

Rostock was the first major concession awarded to a private sector consortium in Germany. It forms part of the 1991 Baltic Action Plan for reducing effluent discharges into the Baltic Sea. Eurawasser’s work on the first phase of the Rostock wastewater treatment facility was completed for €130 million in 1995. Total capital spending over the life of the contract will be approximately €460 million. 302,000 served for sewerage and 262,000 for water.

2000 N E Germany 25 year concession 70,000 water & wastewater 2000 Gustrow 25 year BOT 35,000 wastewater

The two contracts signed in April 2000 serve a total of 105,000 people in the Mecklenburg-Pomerania region of north east Germany. The concession contract is with an association of communes with 70,000 inhabitants and involves the provision of 4 million m3 of water and the treatment of 1.3 million m3 of wastewater pa. The Gustrow contract, signed in April 2000, is for the design, construction and management of a wastewater plant to treat 2.4 million m 3 per year. 1994 Goslar 25 year concession 55,000, sewerage

Eurawasser has gained a 25 year sewerage contract for Goslar (Lower Saxony) from April 1996. Eurawasser controls a holding of 100% of the management and 49% of assets in terms of equity stakes. The facility will treat 98,000 people equivalents; 55,000 people, 43,000 for industry. 2000 Kriensen, 25 year concession 12,000 water and sewerage

In February 2000, a concession was signed for services to the city of Kriensen.

2001 Schwerin Participation 100,000 water & sewerage Suez will participate in up to 49% of the water company following a two year transition period (called a ‘silent participation’) in the city’s multi-utility. Great Britain Suez’s sold 72.5% of its 100% stake in Ondeo Services UK in May 2002 (see separate entry for Northumbrian Water). From 1988 to 1996, Suez’s UK strategy has been acquisition led. For example, controlling stakes in Essex Water and Suffolk Water were bought in 1988 (and the companies subsequently integrated) and Newcastle & Gateshead Water and Sunderland & South Shields Water were acquired in 1989, along with 9% of Anglian Water Plc’s equity. The stake in AWG was sold in 1994 in order to offset losses from the Suez’s construction activities and to raise funds for other acquisitions. Turkey

1997 Antalya 10 year O&M 535,000 water & wastewater



This is a delegated management contract for the Antalya Water and Sewerage Authority. Suez beat Thames, United Utilities/Bechtel and SAUR for the contract. ANTSU will be a 50/50 joint stock company with ENKA. The contract involves customer billing and wastewater treatment. The city’s population is forecast to grow to 960,000 by 2005. Morocco

1997 Casablanca 30 year management 3.5million water & sewerage Lyonnaise des Eaux de Casablanca (LYDEC) manages the Urban Community of Casablanca contract, covering 4.0million people. This represents 25% of the Moroccan market, with a 1,000km 2 area and 23 urban communities covered. Ondeo Services will be responsible for water and sewerage and Elyo for electricity. Suez holds 60.3% of LYDEC’s equity, EDF International 18%, Endessa 18% and Agbar 5%. The water contract is worth DH.5 billion (US$517 million) for the expansion and upgrading of water distribution and treatment. Over 80% of the population is currently connected, which will increase to 85% in 5 years, 90% in 10 years and 100% in 20 years, with price rises in years 2 and 3. The wastewater contract is worth DH.16 billion (US$1.6 billion). It involves the construction of three WWTWs, including recovery systems and the creation and extension of the sewerage network in development zones of western Casablanca. Currently, 5% of the population is connected to the sewerage network. Leakages of 0.2million m3 pa have been dealt with since 1997, equivalent to 5% of water delivered.

2000 Oum Er Rbia 30 year concession Bulk water provision The bulk water supply concession for one third of Casablanca was awarded to Elyo and Ondeo Services. €30.5 million will be spent on the rehabilitation and upgrading of bulk water supplies delivering 55million m3 of water to the city, generating €305 million over the concession’s li fe. Saudi Arabia In June 2002, Suez signed a contract with the Kingdom of Saudi Arabia to oversee a €10 billion 10 year investment programme for the development of water and wastewater in Mecca Province. Mecca Province has 7.5million inhabitants and three major urban areas: the Holy City, Jeddah and Taif. In Jeddah, the second largest city in the country (2.6million people) there is a chronic shortage of water resources and less than 20% of the city is equipped with a sewer system. Jordan

2002 Northern Jordan 25 year BOT 2.5million water & wastewater The contract, announced in July 2002, is designed to bring new water resources into the north of the country. It represents an evolution of the 1999 O&M contract for Greater Amman. 60% of the US$154 million capital spending will come from US AID as a grant. The Khirbet as -Samra treatment facility will replace an existing waste stabilisation pond treatment system, serving about 2.5million residents in Amman and surrounding towns. Construction started in December 2003 with the consortium operating the plant for 22 years after it comes into service in 2006. The facility will handle 268,000m 3 per day of wastewater and the contract will generate revenues of US$15 million per annum. Cameroon

2000 SNEC 20 year concession 5.3million water provision A 51% stake in SNEC (Société National d'Eau du Cameroon) was acquired in May 2000 as part of a concession award. The contract includes the upgrading and rehabilitation of water distribution systems in a number of towns and cities, including Douala and Yaounde, which account for 43% of Cameroon’s population. Turnover will be €24 million pa, with total investments of €300 million. North America United Water Resources (UWR) was founded in 1869 and was floated in 1986. In 1994 UWR merged with Suez’s General Waterworks Company, giving Suez a 30% holding in UWR. Until it was acquired by Suez, it was the second largest listed water services company in the US. Suez’s USA arm, Lyonnaise American Holdings acquired the remaining 67% of UWR’s equity that it did not hold in 2000 and its 50% holding in United Water Services (UWS) for €1,108 million. The company currently serves 7.2million people through 45 regulated utilities in 17 states in the USA, and had a turnover of €499 million in 2000 and €542 million in 2001. In 2002, a US$46 million water and sewerage contract was awarded by Laredo, Texas, covering 190,000 customers or some 700,000 people.



Current and recently gained activities (US$ million pa, 2002-03)

Regulated markets 360 O&M outsourcing 175 Consumer products 55 Industrial clients 1,500 Mexico 70

UWR, regional breakdown of people served by regulated activities in 2003

Arkansas 65,000 Connecticut 14,000 Delaware 105,000 Florida 200,000 Idaho 190,000 New Jersey 865,000 New York 403,250 Pennsylvania 180,000 Rhode Island 19,000 Total utility operations 1,851,250

In addition, approximately 300,000 people are served by smaller owned activities in eight other states. UWS, non-regulated activities UWS was formed in 1997 through the merger of LDE/UWR and JMM-OSI. UWS has 75 contracts and currently serves some 5.4million people via a series of O&M contracts. 2001 turnover was US$174.8 million. The Bechtel/United Utilities O&M outsourcing company US Water was acquired for US$40 million in 2002. US Water gained its first water and wastewater operating contract in 1982 with the New Jersey Highway Authority. In total, US Water operates contracts for 70 water and sewage treatment plants in 32 municipalities in the USA serving an estimated 1.0million people. These activities are concentrated in Illinois, North Carolina, Rhode Island and New Jersey.

Location (state) Contract Water Sewerage Combined Allamuchy (NJ) O&M, WTW & WWTW 3,900 3,900 3,900 Atlanta (GA) 20 Year O&M, WTW 1,500,000 0 1,500,000 Avalon (CA) 5 Year O&M, WWTW 0 4,000 4,000 Banning (CA) 5 Year O&M, WWTW 0 25,000 25,000 Bedminster (NJ) 5 Year O&M, WW 0 7,100 7,100 Big Canoe (GA) 5 Year O&M, WTW & WWTW 4,500 4,500 4,500 Boone County (IA) 5 Year O&M, WW collection 0 4,500 4,500 Burbank (CA) 5 Year O&M, WWTW 0 100,000 100,000 Camden (NJ) 20 Year O&M, WTW & WWTW 87,500 87,500 87,500 Cumberland (IA) 5 Year O&M, WWTW 0 6,000 6,000 El Segundo (CA) 5 Year O&M, WWTW 0 150 150 Freeport (IL) 5 Year O&M, WTW & WWTW 28,000 28,000 28,000 Gary (IA) 10 Year O&M, WWTW 0 180,000 180,000 Hoboken (NJ) 20 Year O&M, WTW 35,000 0 35,000 Indianapolis (IA) 10 Year O&M, WWTW 0 800,000 800,000 Jacksonville (FA) 20 Year O&M, WWTW NA NA NA Jersey City (NJ) 8 Year O&M, WTW 239,000 0 239,000 Killingly (CT) 5 Year O&M, WWTW 0 2,600 2,600 Laredo (TX) 5 Year O&M, WTW & WWTW 700,000 700,000 700,000 Manalapan (NJ) 20 Year O&M, WTW 1,000 0 1,000 Manchester (NJ) O&M, WTW 19,100 0 19,100 Milwaukee (WI) 10 Year O&M, WWTW 0 1,200,000 1,200,000 North Adams (MA) 10 Year O&M, WTW 15,500 0 15,500 Pekin (IL) 20 Year O&M, WWTW 0 34,600 34,600 Phillipsburg (NJ) O&M, WWTW 0 31,450 31,450 Pittsburgh (PA) O&M, W & WW 350,400 350,400 350,400 Plainfield (IA) 20 Year O&M, WTW 25,000 0 25,000 Rahway (NJ) 20 Year O&M WTW 25,000 25,000 25,000 Reidsville (NC) O&M, WTW 14,300 0 14,300 San Antonio (TX) 10 Year O&M, WTW 150,000 0 150,000 Springfield (MA) 20 Year O&M, WWTW 0 275,000 275,000 Stonington (CT) 5 Year O&M, WTW 16,000 0 16,000 Total 3,214,200 3,869,700 5,884,600



Puerto Rico This contract had been gained from VE in 2002. In April 2004, the O&M contract was terminated by mutual consent between Ondeo de Puerto Rico and the water authority’s PRASA. €241 million in revenues were generated in 2002. Canada

1998 Banff, Alberta 5 year O&M 7,600 sewage treatment One O&M contract, operated by UWS. The Halifax contract, gained in 2002 was rescinded in 2003. In 2004, a €80 million construction contract for Halifax was signed, with the municipality operating three wastewater treatment plants which will enter service between 2006 and 2008. Mexico Suez operates in Mexico through ASIM, a 50:50 JV with Peñoles (BAL Group). In July 2002, Ondeo acquired Azurix’s Mexican operations through ASIM for US$93 million. The five contracts acquired bring Suez’s population served in Mexico to 7.5million along with US$70 million pa in revenues.

2004 San Luis Potosi 18 year BOT 400,000, sewage treatment This contract has a total value of €263 million, with a two year construction and 18 year operational phases. 57% of the 80,000m 3 per day of wastewater will be subject to primary treatment and used as agricultural water. The other 43% will be subjected to tertiary treatment and used for cooling a power station. The contract was awarded to Degrémont, Sumitomo (Japan) and Prodin (Mexico) in June 2004.

1993 Mexico City 10 year O&M 2.8million water systems 1999 Mexico City 5 year O&M 2.1million water systems

In 1993, IACMEX was awarded a 10 year O&M contract for water metering, billing and collections and water mains maintenance for the central federal district of Mexico City. Azurix acquired a 49% holding in Industrias del Agua de la Cuidad de Mexico (IACMEX) from Severn Trent in 1999. This is for the development of metering and water supply systems, as well as making 330,000 new connections.

1999 Puebla 20 year concession Sewage treatment 2000 Culiacan 20 year concession Sewage treatment

Ondeo Degrémont operates six sewage BOTs in Mexico, including the above contracts. The Puebla concession announced in October 1999 is for a sewage treatment works capable of handling 13,000m 3 of effluents each hour. The Culiacan facility is situated in Sinaloa state and has a capacity of 6,160m3 per hour. There are two other municipal BOTs serving Juarez and Torreon, and two industrial BOTs based in Santa Cruz and Altamira.

1993 Cancun 30 year concession 520,000 water and sewerage The Cancun resort area has a population of 430,000, which had grown to 520,000 by 2002 and is forecast to grow at 3% per annum to 2015. There are currently 78,000 connections. 4.3million tourists visit the resort each year. 65% of the concession’s revenues currently come from hotels (with US dollar denominated revenues), with 27% from residential water provision and 8% from wastewater. Azurix acquired its stake in the in Desarollos Hidraulicos de Cancun (DHC) concession in 1999. The concession generates revenues of US$50 million pa and is profitable. There are also 3 BOT contracts previously operated by Azurix:

1999 León BOT 1.1million sewage treatment 1999 Torreón BOT 1.0million sewage handling 1999 Matamoros BOT Industrial sewage treatment

Argentina

1997 Cordoba 30 year concession 1.27million water & sewerage The Aguas Cordobesa consortium consists of Ondeo Services (39%), Agbar (17%) and five Argentinean companies. US$465 million was to be invested prior to the Peso crisis but this sum is now being renegotiated. 97% of the population is to be connected to the mains water supply network in 10 years and 660,000 to the sewerage network in the medium term. Turnover in 2001 was US$69 million pa. By 2003, 91% of the population was connected to water services after an investment of US$120 million.



1995 Santa Fe 30 year concession 1.8million water & sewerage Aguas Provinciales de Santa Fe is majority held by Ondeo Services (52%) and Agbar (26%). The consortium was to invest US$785 million prior to the Peso crisis, which is also to be renegotiated. By 2001, water was being supplied to 1,707,500 people and 1,125,000 were connected to the sewerage network, with 2.7million living in the city. Turnover in 2001 was US$104 million. Buenos Aires

1993 Buenos Aires 30 year concession 7.8million water & sewerage Aguas Argentinas (AASA) is the world’s largest single water and wastewater privatisation to date and (until the 2001-02 Peso Crisis) arguably the most successful. It is described in detail in the country entry for Argentina. Suez’s consortium won the bidding for the concession in April 1993 and took over the management of a run-down network with 45% distribution losses, providing water to 70% and sewerage for 58% of the city’s 9million inhabitants. Between 1993 and 2001, water production was increased by 37% and the number of connections by 30%. The population connected to water has increased from 6.0million in 1993 to 7.8million in 2001 and from 4.9million to 5.8million for sewerage. All performance criteria targets have been significantly exceeded on a consistent basis. In 1995, the municipality of Quilmes was incorporated into AA's operating mandate. The municipality has 530,000 people, 87% of whom are served with water and 53% with sewerage. Suez holds 46% of the concession’s equity and Agbar a further 25%, giving Suez effective control. Capital spending for AA in 2001 was US$140 million, with the priority upon low cost water and sewerage connections for poorer neighbourhoods. Turnover in 2001 was US$608 million. To date US$1.6 billion has been invested in AA. During 2001, water supply was extended to 1.5million people through the US$135 million Saavedra-Moron pipeline. Suez had €480 million in hard currency debt in Argentina at the end of 2001, the great majority relating to water investments. The company recorded a €80 million loss on currency translations for the year, along with releasing €118 million in provisions. Despite the Peso crisis, all services are being maintained while the company seeks to adapt these contracts to the new circumstances. A further write-down of €500 million (net of minorities and tax) was made in June 2002. In July 2004, an interim debt restructuring agreement was drawn up to create the basis for a normalisation of the contract in 2005. Suez will undertake a Peso 242million capital spending programme in 2004-05 including connecting 110,000 people to water and 250,000 people to sanitation services. Bolivia

1997 La Paz & El Alto 30 year concession 1.4million water & wastewater Aguas de Illimani is the consortium operating the concession. The shareholders are Suez (55%), Banco Mercantil (20%), Ingineniere Connal (5%) and other Argentinean investors who hold the remaining 20%. La Paz has 750,000 people and El Alto 700,000. The concession started in July 1997. This involves US$360 million in investments over the contract period. 96% of the population is connected to the mains, against 83% for water and 50% for sewerage in 1997. Service coverage has increased by 350,000 since the concession began. Brazil

1995 Limeira 30 year concession 256,000 water & sewerage This is a landmark concession in Brazil. Currently 250,000 people have been connected to water and sewerage services (100%), with distribution losses falling from 40% to 17% from 1995 to 2001.

2000 Manaus 30 year concession 1.4million water & sewerage The contract to manage the water concession of the city of Manaus, the capital of Amazonia in Brazil was awarded in June 2000. This is the largest private water contract awarded in Brazil. Suez holds 100% of Aguas do Amazonas, which had revenues of US$70 million in 2001. Investments are concentrating on improving drinking water services, expanding them to peri-urban areas and developing wastewater treatment services, which have risen from 4% in 2000 to 10% of connections in 2002. US$11 million was spent on improving drinking water quality in 2001, along with cutting distribution and illegal abstraction losses from 77% in 2001 to 70% in 2003.



Chile

1999 Santiago Privatisation of EMOS 5.1million water & sewerage Suez and Agbar acquired 51% of Empressa Metropolitana de Obras Sanitarias (EMOS, now called Aguas Andinas), Santiago’s water supply company for a total of US$1,135million in 1999 and 2001. All 44 districts of the city are to be covered, along with the long-term development of its wastewater services. Aguas Andinas generated €215 million in consolidated revenues for 2003. Revenues are expected to double in the next ten years because of wastewater expansion. Currently, 100% of the population is served with piped water and 97% by mains sewerage, while 75% of sewage effluents are treated, (see separate company entry for Aguas Andinas ). In July 2004, Agbar bought 30.1% of Suez’s holding in Inversiones Aguas Metropolitanas Limitada (IAM) for €139.4 million. IAM holds 51% of Aguas Andinas, with Suez holding 19.9% of IAM. The deal reduced Suez’s net debt by €220 million.

2000 NE Santiago Aguas Cordillera 315,000 water & sewerage Enersis sold Aguas Cordillera to EMOS for US$193 million in June 2000.The second highest bidder was Biwater at US$179 million. Aguas Cordillera serves 88,000 customers in the Vitacura, Las Condes and Lo Barnechea districts of Santiago. Colombia In January 2004, the city of Bogota unilaterally ended the 1997 Saltire WWTW contract, which had served 1,500,000 people. China Suez has a total of 16 major contracts for rehabilitating and expanding current water treatment works. Suez now serves approximately 12.9million people in China via Sino-French Holdings (S-FH), which it operates jointly with New World Development Co. Ltd. of Hong Kong. Ondeo manages €800 million pa of operations in China in 2003, up from €300 million in 2000. Degrémont has completed 132 water and sewage treatment construction contracts in China, having been operating in China since 1975, and is responsible for 20% of China’s water and wastewater treatment facilities.

2004 Tianjin 35 year O&M, S-FH 0.85million bulk water supply The RMB470 million (€57 million) water treatment plant is to serve part of the city of Tianjin. The Tianjin Tanggu Sino-French Water Supply (S-FH) is a 50:50 joint venture between the city and S-FH. The facility will have a treatment capacity of 310,000m 3 per day.

2002 Chongqing 50 year concession 700,000 water 2002 Qingdao 25 year BOT 2,300,000 water

Two WTWs in Chongqing are to be refurbished and expanded for a total cost of €150 million. The two plants can handle 275,000m 3 of water a day and can be expanded by a further 100,000m 3/day. Likewise, two WTWs in Qingdao are to be refurbished and expanded for a total cost of €430 million. The two plants treat 540,000m 3 of water per day.

2001 Panjin 30 year BOT 267,000 bulk water 2001 Xinchang 30 year BOT 135,000 bulk water 2004 Sanya 30 year O&M 300,000 water

Suez and New World Group, via S-FH, operate three water treatment works in Hainan delivering a total of 230,000m 3/day of water for €36 million and managing them on behalf of the city. The system will be 50% held by S-FH and 50% by the municipality’s Hainan Tianya Water Industry Holding Co. The Sanya contract started in 2004.

2000 Zhengzhou 30 year BMO, S-FH Bulk water supply 2000 Baoding 20 year BMO, S-FH Bulk water supply

The contracts for Zhengzhou (Henan) and Baoding (Hebei) were announced in March 2000. They will serve a total of 1.7million people, with US$62 million being spent on capital works for facilities delivering 560,000m 3 of water per day and generating a turnover of US$500 million over the contracts’ life.

1999 Changtu 30 year BMO, S-FH 0.3million bulk water supply 1999 Wanzhou 30 year BMO, S-FH 0.5million bulk water supply 1998 Zongshan 22 year BMO, S-FH 1.7million bulk water supply

The contracts for the provinces of Changtu (Chongqing) and Wanzhou (Liaoning) were formally awarded in April 2000, and involve a total of US$35 million in capital spending. These contracts will generate US$400 million in



turnover during their lives. Zongshan is in Guangdong province. The town and surrounding areas has 1.5million people. The contract is to seek to provide water by expanding the current capacity of the two extant plants from 0.7million m3 per day to 1.3million m3 per day. 66% of the Zongshan contract is held by Sino-French Holdings, with the remainder in municipal hands. Revenues will be in the region of F100 million pa. Degrémont carried out the engineering work and the extended facility entered service in 1999.

1997 Lianjiang 30 year O&M, S-FH 0.3million bulk water supply Lianjiang is in Guangdong Province, with 1.3million inhabitants, 70% of whom are currently served with potable water. The project involves US$15 million in Capex for the upgraded potable water treatment plant, which is being built by Degrémont.

1995 Chongqing 30 year BMO, S-FH 0.4million bulk water supply A US$25 million build and manage contract in Sichuan province, based upon enlarging a water treatment facility that now supplies 20% of the city’s 2million population.

1994 Guangzhou 30 year BMO, S-FH 0.9million bulk water supply The Guangzhou contract will account for 25% of the city’s current needs.

1992 Tanzhou 35 year BOT, S-FH Bulk water supply 1994 Gaozhou 30 year BOT, S-FH 170,000 bulk water supply 1996 Nanchang, Jiangxi 28 year BOT, S-FH 0.9million bulk water supply

1996 Macao 25 year concession 540,000 water supply

This is a renewal of the SAAM contract awarded in 1988 for water provision to 540,000 people, including 140,000 customers. Suez/New World Holdings (NWH) holds 85% of the concession. Taiwan

2002 Kaoshing 17 year BOT 3,000,000 sewage treatment Taiwan Water Supply Corporation awarded a reconstruction and O&M contract to Ondeo Degrémont and Ecotek, a subsidiary of China Steel, for the overhaul and operation of a drinking water plant in Kaohsiung. The contract is worth €200 million, of which Ondeo Degrémont’s share is €90 million or €6 million pa over the 15 year O&M stage. The new facility will produce 450,000m 3 of drinking water per day by March 2004. Korea

2000 Yangju 24 year BOT 100,000 sewage treatment Suez and Ondeo Degrémont (60%) and Hanwha (Korea, 40%) became the preferred bidder for a contract to design, build and manage three sewage plants for a total daily volume of 75,000m³ and an 85km collecting network in the county of Yangju, in the province of Kyonggi. The population currently stands at 100,000 habitants but is predicted to reach 400,000 inhabitants in 2016 due to urban development. Turnover will be of €185 million over the duration of the contract. 2001 Pusan 18 year BOT 800,000 sewage treatment

The 135,000 gallon per day facility and 24km of collecting sewerage pipes will cost US$160 million to build, with the contract generating US$490 million over its lifetime. Ondeo holds 65% of the consortium, along with Samsung Engineering (20%) and Khumo Industrial (15%). Pusan has a total population of 4million. Philippines

1997 West Manila 25 year concession 4.3million water & sewerage Maynilad Water Services, Inc. (MWSI) was awarded the western half of the Metro Manila water distribution concession in August 1997. Maynilad Water is meant to supply potable water 24 hours a day to approximately six million people in the western zone by 2007. While Manila Water had a difficult start due to its low original tariffs, Maynilad has suffered from a mid concession-life crisis. The problems arose when Maynilad took on 90% (US$800 million) of MWSS’ foreign debt, which between 1997 and 2000 doubled in Peso terms from P20 billion to P40 billion due to the Peso’s weakness. Although Maynilad gave notice to halt the concession in March 2003, continuing arbitration and associated legal processes have meant that it continues to run under its current structure. The November 2003 and April 2004 agreement would have resulted in a write-off of P3.8 billion (P3.2 billion in equity and P629 million in debt) and the loss of control in Maynilad. As of July 2004, a new court ruling has meant that the entire arbitration process probably needs to be restarted. For further details, see the Benpres (Philippines) company entry.



Indonesia

1997 West Jakarta 25 year concession 3.5million water West Jakarta has an estimated 4.5million people in total. Suez owns 95% of the Jakarta concession’s equity. The initial investment period was extended from 5 to 10 years in 2000 so as to prevent price rises after a 24% tariff rise in 1999. 50% of residents are currently connected, it is predicted this will rise to 100% by 2022, with 80% paying. Jakarta’s population is expected to rise from 9.5million to 12.5million by 2020, with the West Zone population rising to 6.7million.

1997 Medan 25 year BOT 2.5million bulk water US$85 million BOT for drinking water supply plant for Medan. It is 85% held by Suez. There are currently 2.5million people in the city. The water supply for Phase 1 will be 170,000m 3 per day by 2000, increasing to 260,000m 3 per day. Turnover will be US$2 billion over the contract’s life, or US$80 million pa. Medan’s population is expected to grow to 8million+ by 2015 (currently, the city has a population of 2.5million). Suez has operated a water contract in the industrial zone of Cilegon, Java since 1993. Malaysia

1993 Johor-Barhu 20 year BOT contract 715,000 water supply Johor-Barhu involves the lease of a water provision facility generating 0.63million m³ of potable water per day. Suez holds 25.5% of the holding company Equiventures Sdn. Bhd., which is expected to seek a market listing in due course.

1995 Kota-Kinabalu 20 year BOT contract 500,000 water supply In Kota Kinabalu (province of Sabah) a 20 year bulk supply concession for 0.24million m³ of water per day to 0.5million people was granted to Jetama Sdn. Bhd. 35% of which was held by Suez in 1995. After its privatisation in 1995, Sabah’s water systems were to be completely upgraded.

1989/95 Taiping, Perak 20 year BOT contract 350,000 water supply In Perak, G.S.L. Water Sdn. Bht. (34.2% Suez) serves 0.35million people via a 20 year BOT contract signed in 1988 and started in 1989. The contract was extended when a 0.11million m³ per day water treatment plant was commissioned in 1995. Australia

1993 Sydney 25 year BOO 3million water treatment 1996 Noosa 25 year BOT 35,000 wastewater

Australian Water Services (AWS) is a JV between Suez and Lend Lease Pty formed by Suez in 1991. The Sydney water provision BOT signed in 1993 saw the US$200 million facility enter service in October 1996. AWS has now entered the 25 year operating concession phase. A BOT concession for Noosa, Queensland was gained in 1996. This is a FF200 million 25 year BOT for a wastewater treatment works. Suez Environment Industrial Services – Industrial water outsourcing Suez has developed SEIS (Suez Environment Industrial Solutions) for its industrial services activities. This has been developed along divisional lines: Tractabel Industrial Solutions (energy), Ondeo Industrial Solutions (water and wastewater) and Sita One (Waste management). Suez has 60,000 water and wastewater customers, mainly for hardware or chemicals, with a 20% share in this global market. Water customers include Yoplait, Pemex Salina Cruz (Mexico), IBM, BSN, Eridania Beghin Say, Coca-Cola (France, 1999) and Scottish Courage (1999). In 2001, BOC Gases, one of the world's largest producers of industrial natural gas, signed a five-year framework agreement with Ondeo Industrial Solutions. This contract covers water conveyance services and effluent treatment for eight BOC sites in England, Wales, and Scotland. Ondeo Industrial Solutions had a turnover of €157 million in 2002, rising to €168 million in 2003, with an organic growth of 19%. In addition, according to Public Works Finance (PWF) (March 2003), Nalco has industrial outsourcing revenues of US$200 million from 72 clients in 2002 against outsourcing revenues of US$158 million from 62 clients in 2001.



Industrial contracts gained in 2001 (€million pa)

Revenues Client Country Activities DB O&M

Contract duration

Aticorta Italy WWTW 2.5 0.0 N/A Danone Vitapole Belgium WWTW 2.0 3.0 10 years Infineon Australia Process water 3.0 0.0 N/A ISI Pontelongo Italy WWTW 2.1 0.0 N/A Osram Germany Process W & WWTW 2.0 0.0 N/A SEPR Sant Gobain France WWTW 1.0 1.5 5 years Siemens Taiwan Process water 1.5 0.0 N/A Siemens Ireland Process water 1.5 0.0 N/A

In 2002, Danone offered a series of five year integrated industrial services outsourcing contracts for all facilities covering dairy products, bottled water, biscuits and cereals. This covers the management of water, effluent waste and energy. The contract will have a turnover of €100-150 million pa and seeks a 30% reduction in industrial water consumption from 2000 levels by 2010. A joint venture with Antwerpse Waterwerken (Brabo Industrial Water Solutions, BIWS) gained a €10 million 10 year contract with Degussa’s Antwerp plant in November 2003. BIWS will manage the facility’s condensate treatment and supply it with demineralised water. Other contracts gained by Ondeo IS in 2003 included STMicroelectronics and Ascometal in France, Enichem in Italy, Siemens in Spain and M-Real in Germany. In February 2004, Ondeo gained a 20 year €120 million water management contract for the BP Grangemouth complex in Scotland. This includes cooling water, process water and wastewater. Other clients in the UK include Chevron Texaco, Scottish Courage Brewing and Bairds Malt. 2002 Pudong, Shanghai 50 year water management Industrial water provision This contract is a 50:50 JV between Sino French Holdings and Shanghai Pudong Spark Development Zone United, providing 100,000m 3 of industrial water per day, serving the Shanghai Spark Industrial Zone (40,000 customers). The contract is worth €600 million and is the first industrial water contract in China. The contract also caters for the treatment of 50,000m 3 of effluent a day via a new €50 million facility and may be extended to cover the entire water cycle. The Shanghai Chemical Industrial Park includes BP, BASF, Bayer, Huntsman and China’s Gao Qiao. In 2002, Ondeo Nalco gained an eight year contract for oil and water treatment service from Suncor Energy, a company specialising in crude oil extraction from oil sands deposits in north-eastern Alberta, Canada. The deal is worth US$10 million in revenues. Contact Details Name: Suez SA Address:

16 Rue de la Ville l’Eveque, 75008 Paris France

Tel: +331 40 06 64 00 Fax: +331 40 06 66 44 Web: www.suez.com / www.suez-env.com Web: www.lyonnaise-des-eaux.fr Web: www.unitedwater.com Gerard Mestrallet (CEO and Chairman) Gerard Lamarche (Chief Financial Officer) Jean-Pierre Hansen (Chief Operations Officer) Jean-Louis Chaussade (CEO, Suez Environnement) Yves-Thibault de Silguy (International Affairs)



VEOLIA ENVIRONNEMENT SA Compagnie Générale des Eaux was renamed Vivendi in May 1998, while retaining its former name for water and wastewater activities. In July 2000, Vivendi Universal sold 28% of its holding in Vivendi Environnement (VE) via a listing on the Paris Bourse and a further 9% in 2001. Vivendi has in turn been renamed Vivendi Universal (VU) and is concentrating upon the telecommunications and media sectors. Following VU’s financial problems in 2002, the company sold a further 43% of VE’s equity to a series of French institutions and as a result, VE’s results (and debt) are no longer consolidated into VU’s. VE has been renamed Veolia Environnement (VE) so as to differentiate between the two companies. Water activities were grouped under Veolia Water. In 2004, after a recapitalisation exercise, the Générale des Eaux name was revived to become the holding company for Veolia Water’s activities. Veolia Environnement, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Turnover 20,930.0 26,393.7 29,126.7 30,078.7 28,063.0 Operating profit 961.9 1,289.3 -946.4 1,587.57 -766.9 Net profit -42.3 614.8 -2,251.2 339.2 -2,054.7 Earnings per share (€) N/A 2.2 -6.6 0.93 -5.13

Water

Turnover 10,467 12,768 13,641 11,288 11,155 Operating profit 763 1,021 1,122 1,024 784

Générale des Eaux (GDE) was founded in 1853 and started the privatisation of France’s water sector by winning a concession for water supply to Lyon and gaining the first of a series of concessions serving Paris in 1860. In 1884 GDE secured the first wastewater treatment concession, serving the Reims municipality and pioneering the use of ozone to sterilise water at Nice in 1909. VE is also a pioneer in the development of the international water market. Its subsidiary Compagnie des Eaux pour l’Etranger (CEE) was set up in 1879 for international water contracts. CEE took over the water supply concession for Venice in 1880 and further contracts were gained in Verona, Bergamo, La Spezia and Naples. The company set up Compagnie des Eaux de Constantinople for water supply to Istanbul in 1879, and in 1882, CEE gained the water supply concession for Lausanne in Switzerland and Oporto in Portugal. After the First World War, VE decided to restrict its contracts to France. As a result, contracts were either wound up or nationalised during the inter-war years. VE developed its presence in water engineering through the acquisition of SADE in 1918 and Tuyaux Bonna in 1924. Since the 1930s, the French water sector has gradually been privatised with VE being the dominant player in the market. Since 1967, VE has diversified, first into waste management, then energy and more recently into construction, property and media and telecommunications. VE entered the Spanish water market in competition with FCC and Aguas de Barcelona. Professional Services Group of the USA was acquired in 1981 to address the American market and General Utilities Plc was set up in 1986 in anticipation of the privatisation of Britain’s water services. Since 1992, the company has been gaining water and sewerage concessions on a global basis. By 1995, VE had 2,300 operating contracts serving 4,000 municipalities in France. VE reduced the number of subsidiaries in France from 40 to one. The company’s domestic market strength has meant that until recently, it could take a more relaxed attitude towards the international water markets than Suez. Approximate breakdown of revenues by region

€million 2001 2002 2003 France 6,200 6,201 6,116 UK 700 655 655 Rest of Europe – Euro zone 1,200 1,100 1,100 Rest of Europe – Non-Euro zone 300 550 245 USA 3,980 3,378 1,893 Rest of Americas 220 400 315 Africa and Middle East N/A 500 621 Asia N/A 360 391 Australia and New Zealand N/A 240 NA Rest of World 1,000 N/A NA Total 13,600 13,300 11,340

The decrease in revenues primarily reflects the selling off of the engineering activities associated with USFilter since 2002.



VE – Highlights 1853: Compagnie Générale des Eaux (GDE) wins concession for water supply to Lyons 1880-82: Water supply concessions to Venice and other cities 1884: Wastewater treatment concession for Reims 1967: Waste-to-energy projects 1972: Water activities in Spain 1980: Acquires CGEA (waste management and transport) 1981: Acquires Professional Services Group of the USA 1986: General Utilities Plc formed for UK operations 1987: Licence for France’s second cellular telecoms system 1987-88: Acquires construction and property companies 1993: Buys out Eau et Ozone 1995: GDE’s first loss – due to property & construction 1998: Générale des Eaux renamed Vivendi 1999: Acquires US Filter and Berliner Wasser, formation of Vivendi Water 2000: Partial flotation of Vivendi Environnement (VE) from Veolia Universal 2002: Deconsolidation of VE and VU 2003: VE renamed Veolia Environnement 2003: Veolia Water becomes a subsidiary of Générale des Eaux Water activities (excluding Proactiva)

VE: overall water and wastewater activities 2001 2002 * 2003 Industrial wastewater treatment capacity (million m 3/day) 377 259 NA Municipal wastewater treatment capacity (million PE) 60 49 NA Treatment efficiency of wastewater treatment plants 84% 86% 92% Water provided (billion m3/pa) 5,801 5,400 6,112 Efficiency of water systems – Worldwide 71% 75% 77% Efficiency of water systems – Europe 82% 82% 80%

* Figures restated for 2002 91% of VE’s customers had metering systems in 2003. Water efficiency in Europe in 2003 for its ongoing activities was 83%. The difference is accounted for by newly acquired concessions operating more run down water assets. Population served in each country

Country Water Sewerage Total Europe Albania 550,000 550,000 550,000 Belgium 0 1,100,000 1,100,000 Czech Republic 3,273,000 3,033,000 3,273,000 Denmark 60,000 0 60,000 France 26,000,000 17,000,000 26,000,000 Germany 4,700,000 4,780,000 4,800,000 Great Britain 3,315,000 0 3,315,000 Hungary 175,000 2,125,000 2,125,000 Italy 995,000 1,300,000 1,645,000 Malta 290,000 290,000 290,000 Netherlands 0 1,700,000 1,700,000 Poland 70,000 70,000 70,000 Portugal 110,000 185,000 185,000 Romania 2,250,000 0 2,250,000 Spain NA NA NA Sweden 50,000 50,000 50,000 The Americas Argentina * 200,000 0 200,000 Brazil * 7,300,000 2,750,000 7,300,000 Canada 50,000 0 50,000 Colombia * 2,883,000 0 2,883,000 Mexico 7,800,000 4,300,000 7,800,000 USA 7,000,000 6,000,000 13,000,000



Country Water Sewerage Total Venezuela * 552,000 0 552,000 Asia and Pacific Rim Australia 2,500,000 1,200,000 2,500,000 China 10,400,000 3,800,000 12,000,000 Indonesia 100,000 0 100,000 Malaysia 5,600,000 0 5,600,000 New Zealand 25,000 105,000 105,000 Philippines 10,000 0 10,000 South Korea 0 2,400,000 2,400,000 Africa and The Middle East Azerbaijan 50,000 0 50,000 Chad 3,000,000 0 3,000,000 Gabon 450,000 450,000 450,000 Israel 700,000 0 700,000 Morocco 1,200,000 200,000 1,200,000 Namibia 240,000 240,000 240,000 Niger 600,000 0 600,000 Total outside France 68,998,000 44,328,000 82,153,000 Global total 94,998,000 61,328,000 108,153,000

* Proactiva activities The table excludes VE’s 8% holding in Aguas Argentinas, since Suez and Agbar are the majority shareholder. The number served in France has remained effectively constant in recent years. The table also excludes VE’s continuing activities in Spain. Stake divestments Approximately US$390 million has been raised since 2001 through the selling off of non-strategic minority stakes in asset owning water companies in England and the USA. In the former case, this is also related to preparing for VE’s partial bid for Southern Water (First Aqua).

Company Country Holding % Date Value (million) Bristol Water UK 25 March 2002 £23 Mid Kent UK 21 April 2001 £22 South Staffordshire Group UK 32 October 2002 £85 Philadelphia Suburban USA 17 September 2002 US$200

In addition, some US$3,193 million has been raised from the sale of peripheral activities in the US Filter group since 2001. Purchasers have been a combination of companies active in water systems engineering and private equity houses.

Division Vendor Date Value (US$ million)

Surface Preparation International Surface Preparation July 2003 130 Waterworks distribution JP Morgan Partners / TH Lee Partners September 2002 620 Plymouth Products Pentair September 2002 125 Filtration and Separation Pall February 2002 360 Johnson Screens Weatherford International October 2001 140 Culligan Clayton, Dubilier & Rice June 2004 610 Everpure Pentair December 2003 215 Systems & Services Siemens May 2004 993

These sales involved a total write-down of US$4.5 million between 2000 and 2004. VE’s water revenues in the USA will be US$700 million pa post these divestments. International alliances and JVs United Water: The JV between VE and Thames Water. This alliance is for all bids by the two companies in Australasia. Its first success was the Adelaide, South Australia contract in 1995. OMSA: A JV in Mexico with ICA, serving 7.8million people in the country.



FCC / Proactiva: Proactiva Medio Ambiente is a 50:50 JV between VE and FCC for all water and waste management contracts in Latin America. RWE / Berliner Wasser Betriebe: A joint bid gained the Budapest sewerage concession in 1997. Since 2000, it has been used on a number of occasions. China: VE has a number of local partners in China. Major contracts have recently been gained with Citic Pacific and Beijing Capital Group. France Générale des Eaux started operating in France in 1853. By 1953, the company provided water to 8million people and by 1980, it water to 19.8million people and sewerage to 6.9million. Currently, the figure is 26million water customers and 17million sewerage customers, 16million of whom have their sewage effluents treated. VE has retained the Générale des Eaux name for its operations in France, which currently has 4,000 contracts with 8,000 municipalities in France. The sewerage market is seen as growing at an appreciably faster rate than the water market, because of the low penetration of sewerage networks and sewage treatment in France at a time when the country must comply with the EU’s Urban Waste Water Treatment Directive’s obligations between 2000 and 2005. In France, the company has to concentrate on consolidating its water contracts in an unprecedented competitive and critical atmosphere. As part of the company’s responses to these challenges, customer service charters for 10million people were issued by the end of 1996, with all customers in France being covered by 1999. A €115 million cost cutting programme from 1996-2000 was 70% achieved by the end of 1999. At the start of 1997, Générale des Eaux was awarded two 12 year water treatment contracts for the management of two wastewater treatment works in Tougas and Petite Californie serving 21 urban communes centred in Nantes. Générale des Eaux is replacing Suez for these contracts, a notable event in a country which has previously been characterised by consensual competition.

Générale des Eaux: 2000 2001 2002 2003 Contract renewal rate 90% 77% 92% 80%

New contracts gained in each year have at least cancelled out contract losses in each of these years. For example, 53 contracts were lost in 2003, but 35 new contracts were gained. The average weighted time before the expiration of long term contracts is 12 years. Total revenues for the 211 contracts regained and 35 new contracts in 2003 are approximately €90 million per annum. Denmark One contract for water provision to 60,000 people via VE’s I Krüger AS. Krüger specialises in the manufacture of advanced sewage treatment systems and engineering consultancy. The Netherlands

2002 Delftland 30 year DBFO 1,700,000 sewage treatment The €1.5 billion contract was won by the Delfluent Consortium, led by VE (40%); two Dutch publicly owned water distribution companies, Delta Water (20%) and Waterbedrijf Europoort (20%), Rabobank (10%), Heijmans Beton-en Waterbouw (5%) and Strukton (5%). The contract will start in 2003 and involves operating the working plant at Houtrust and developing the new €258 million plant at Harnaschpolder. VE (50%) will lead a JV, along with Delta Water (25%) and Waterbedrijf Europoort (25%) for operating the facilities and 90km of sewerage network. Delftland serves The Hague and surrounding areas. Spain: the FCC-VE alliance FCC is a Spanish construction and utility company, which dominates the municipal waste collection market. In October 1998, VE acquired 49% of B1998, the holding company for the Koplowitz sisters’ interests in FCC, which in turn holds 56.5% of the company. In July 2004, Veolia sold its 49% stake in B 1998 to a company controlled by Mrs. Esther Koplowitz. The transaction will reduce Veolia Environnement's net indebtedness by €1.1 billion, with a total cash payment to Veolia Environnement of €916 million. Veolia Environnement acquired its stake in FCC from Vivendi in 2000 for a total consideration of €691 million. VE’s has retained Gruppo General des Aguas (water and sewerage) which in 1997 served 3million people in Spain and had net sales of F1 billion. The Proactiva joint venture in Latin America is to continue for the time being. Portugal

1995 Mafra 25 year concession 45,000 water & sewerage



This is VE’s first contract in Portugal. The 25 year water provision concession has sales of F25 million pa (45,000 people, 22,000 subscribers) and will be extended to wastewater. This award has been seen as somewhat contentious, because it has been alleged that this contract has been set up as a loss leader by VE with its water fee tender of Esc92 per m³, compared with the current price of Esc131 per m³ and Agbar’s tender of Esc96 per m³. The municipality intends to invest Esc4-5 billion on improved sewerage systems over the length of the contract. VE has to pay the first 10 years of rent in advance (Esc100 million per annum at the start), with the rent rising as new assets are put into place.

1995 Ourem 25 year concession 40,000 sewerage The concession to serve Ourem (110km north of Lisbon, and 80km from Mafra) was gained in April 1995 (this leaves 40,000 people. Which represents 15,000 subscribers), with a turnover of F11 million pa.

1996 Frielas 30 year concession 70,000 PE sewerage In Frielas, a suburb of north Lisbon, VE is involved in the construction of a wastewater treatment plant. Construction started in March 1996 for a F280 million facility. This was completed at the end of 1998 and serves the equivalent of 70,000 people through a concession contract.

2000 Valongo 30 year concession 80,000 PE water and wastewater VE was awarded the concession in July 2000 with a turnover of €7 million per year. Valongo is 20km east of Porto. This contracts operates 2 wastewater treatment plants, 200km wastewater collectors and a 480km water network. Aguas de Valongo serves 31,000 subscribers.

2001 Paredes 30 year concession 60,000 PE water & wastewater VE was awarded the concession in January 2001 with a turnover of €4 million for 2002, rising to €7 million per year. Paredes is 40km east of Porto. This contract operates one wastewater treatment plant, 80km wastewater collectors and a 100km water network. SBPAR serves 5,000 subscribers. The Czech Republic VE’s turnover in the Czech Republic rose by 11% to €312 million in 2003, with 3.6million people being served by the company. In 2002, VE acquired Bouygues’ 50% holding in their CTSE JV.

2004 Eastern Moravia 30 year concession 160,000 water & sewerage In June 2004 Veolia signed a 30 year contract with Vodovbody a Kanalizace Zlin (VAK Zlin) the water public authority for the eastern part of Moravia in the Czech Republic. The area includes 80 districts. The contract will generate total revenues of around €360 million.

1996 Pilsen 12 year concession 252,000 water & sewerage 1996 Sokolov 10 year concession 130,000 water & sewerage 1999 Aqua Pibram 10 + 10 year concession 75,000 water & sewerage 1999 V Klatovy 10 year concession 50,000 water & sewerage 1999 3 towns 10 year concession 26,000 water & sewerage

Vodarenska and Kanalizanci A S Pilzen (CTSE) serves the city of Pilsen on a lease with O&M work. The contract is currently for water provision (230,000 people) plus wastewater (180,000 people), the latter through a new sewage treatment facility opened in 1997. The contract involves F160 million of upgrading and building work for a sewage treatment works and F40 million for a water purification plant. Industrial and domestic customers pay an equal amount for water and prices are below that seen in most of the Czech Republic. During 1997, the contract was extended to cover a further 72,000 people in the northern part of Pilsen. Allied with the sewerage expansion, this boosted 1998 turnover to Kc700 million. CTSE was awarded a 10 year concession for Sokolov in 1996. The Aqua Pibram and Vodosopol Klatovy concessions were acquired by CTSE in December 1999, along with the privatisation award for the towns of Susice (12,000), Stary Plznec (6,000) and Stod (6,000). In 2000, the Pilsen contract was granted a 10 year extension to 2017, while the Sokolov contract gained a 16 year extension. The Aqua Pibram concession contract was extended by 10 years in 2003, with revenues of €4 million pa.

1998 Northern Bohemia 15 year concession (1995) 1,200,000 water & sewerage Hyder’s stake was sold for Kc795 million (US$26.7 million) to VE, giving the company 43.17% of Severomoravske Vodovy a Kanalizace Ostrava (ScVK), with Severoceske Vodarensky Svaz (SVS), formed by the client towns, holding a further 34.7%. Currently, 1.07million of the inhabitants are connected to the mains



water supply and 0.87million to the sewerage network. ScVK’s turnover to March 1999 was Kc1.1 billion (€72 million, €25 million pa to VE), with pre-tax margins of 12% and profits increasing by more than 10% per annum. 1999 Ceske Budejovice 10 year concession 180,000 water & sewerage

The Ceske contract is operated by 1.JVS. The original concession was granted a 10 year extension in 2000 to 2018 and will generate revenues of €10.2 million pa. 2000 Olomouc 20 year concession 130,000 water

This concession was awarded to CTSE in March 2000. It is the first PSP contract in the region. Total net sales for the contract will be €200 million. 2001 Prague 28 year concession 1.2million water & wastewater VE and Awg paid €174 million for a 66% stake in PVK. The 13 year concession will generate €60 million in 2001 and €120 million in subsequent years. The contract will concentrate on service quality improvement and upgrading water and sewage treatment to EU standards. The concession was extended to 28 years in 2002. Poland

2001 TGMS 25 year concession 70,000 water & sewerage The contract to operate the Tarnowskie Gory and Miasteczko Slaskie water company was gained in December 2001. The company manages the municipal water and wastewater services for 70,000 people in the two towns. VE’s initial 33.85% stake will increase to 63.5% by 2003. The contract will generate total revenues of €125 million. Romania

2000 Ploiesti 15 year concession 250,000 water The concession was awarded to Apa Nova SRL (80% held by VE, 20% by the municipality) in April 2000. €26 million will be spent on network upgrading and renewal. The contract’s turnover is €8 million pa.

2000 Bucharest 25 year concession 2million water The concession to modernise Bucharest's water supply was granted in April 2000. The annual investment quota for the project is €42 million for the first five years of the concession out of an expected total of €1.05 billion. Annual revenues will be €80 million pa. United Kingdom In April 2002 Veolia Water UK signed an agreement to acquire First Aqua, the holding company of Southern Water. After the bid was blocked by the UK Government, a hybrid solution was engineered. First Aqua was acquired by Southern Water Investments: in turn, Southern Water Capital (49% held by Royal Bank of Scotland and 51% by institutional investors) holds 75% of Southern Water Investments , with VE holding the other 25%. For VE, the £160 million investment (plus £110 million in Preference Shares, exercisable from 2008), is some way below its original £374 million investment. See company entry for First Aqua. Veolia Water UK has controlling holdings in three British Statutory Water Companies (SWCs), asset owning entities that supply water only. VE acquired six SWCs between 1988 and 1990, the most important of which is Three Valleys Water.

Y/E 31/12/2003 (£ million) Population Equity

Holding Turnover Operating

Profit Three Valleys Water 3,000,000 100.0% 170.44 45.55 Tendring Hundreds 150,000 99.1% 12.67 5.01 Folkestone & Dover Water 163,220 78.7% 13.74 5.22

Ofwat and the Monopolies and Mergers Commission (now the Competition Commission) had enforced limits on VE’s holdings in South Staffordshire Group Bristol Waterworks and Mid Kent Holdings. In consequence, these stakes have been divested. The 1996 bid for Mid Kent Holdings Plc was blocked by the MMC in January 1997, while the merger of the constituent parts of Three Valley’s Plc was delayed by a reference to the MMC.



Three Valleys consists of the Colne Valley, Rickmansworth and Lee Valley Water companies, which were merged in 1994. The company grew again following a merger in October 2000 with VE’s North Surrey Water, which was formed in 1973 from four founder companies. The company provides 0.860 million m3 of water per day to parts of Bedfordshire, Berkshire, Buckinghamshire, Essex, Hertfordshire, Surrey, and the London Boroughs of Barnet, Brent, Ealing, Harrow, Hillingdon and Enfield. Tendring Hundreds and Folkestone and Dover are characterised by high levels of domestic metering. 62% of the former company’s domestic customers use meters, while the latter company aims to have 90% of customers metered by 2015 compared with 42% in 2003. The Folkestone Waterworks Company was formed in 1848, one of the first to take advantage of the Waterway Clauses Act of 1847 and merged with two other companies in 1953 and 1970. Germany Berliner Wasserbetriebe

Y/E 31/12 (€million) 2000 2001 2002 2003 Turnover 1,116 1,101 980 998 Net profit 20 116 NA 116 Capital spending 367 447 250 NA

BWB dates back to 1856, including 45 years with its services being divided by the Berlin Wall. In 1999, after the partial privatisation of BWB, Berlinwasser Holding AG was formed and BWB was vested into this company. The consortium (VE 50% and RWE 50%) acquired 49.9% of €1.69 billion, with the majority 50.1% stake being held by the City of Berlin.

1999 Berlin 30 year concession 3.9million water and sewerage BWB serves 3.5million people in Berlin and 0.4million in Brandenburg, with nine water treatment works and six sewage treatment works. In 2001, 215million m3 of drinking water was provided, along with 238million m3 of wastewater from Berlin and the surrounding area was treated Berlinwasser International AG BWB sought to enter international markets in 1994 and gained its first activities in 1997-98. Berlinwasser International has nine projects in five countries with a total order backlog worth €495 million in 2003. China 2003 Nanchang 20 year BOT 1,000,000 wastewater

Berlinwasser International has a BOT-contract to build a 330,000m 3 per day wastewater treatment plant in Nanchang, the capital of Jiangxi. BWI and its partner, the Third Construction & Engineering Co. Ltd of Beijing Urban Construction Group (BUCGT) are developing the €36 million project with a wholly Chinese project-financing. Construction began in January 2003 and commissioning is planned for autumn 2004. Berlinwasser also has a 35% stake in a BOT water project signed in 1997 with the Xian Water Company covering a 550,000m 3 per day water treatment plant that was commissioned in November 2001 and supplies water to 2 million people in the city of Xian. In December 2003 Berlinwasser sold its equity interest in Waterworks Xian South Co. Ltd. to the majority shareholder, the water enterprise of Xian, China for US$11.2 million due to the Chinese governmental decree of 11th September 2002. Albania 2003 Four Albanian towns 5 year O&M 450,000 water & wastewater

Berlinwasser International gained a five year €4m contract to take over management of water supply and wastewater disposal in the Albanian towns of Durres, Fier, Lezhe and Saranda. The project is supported by €20 million in funding from the World Bank and will be implemented by a JV between BWI (60%) and Aquamundo (40%). Sewage treatment will be upgraded to secondary (biological) standards and water supplies will be improved from two to four hours daily to a 24 hour supply.

2002 Elbasan 30 year Concession 100,000 water & wastewater



Berlinwasser (97.5 %) and Rodeco Consulting (Germany) (2.5 %) operates Elber Sh.p.k., a 30 year concession for water supply and wastewater disposal in Elbasan, with 100,000 inhabitants. Water is supplied for four hours a day and will be improved to a 24 hour service. Hungary

1997 Hodmézövásarhely 25 year concession 50,000, sewerage Zsigmondy Bela Rt. Manages the concession agreement with the city of Hodmézövásarhely. A wastewater treatment plant with a capacity of 30,000m³ per day has been upgraded to comply with the UWWTD. Azerbaijan

2001 Imisli 10 year Lease Contract 50,000, water Waterworks Imisli JV Ltd is a joint venture between BWI and the city of Imis li’s water company. The city’s water treatment works were rehabilitated and expanded in 2003, with provision rising from two hours a day to 15 along with a 57% tariff collection rate. Namibia 2001 Windhoek 20 year operation 240,000, water & sewerage

Limited water resources and rising water demand encouraged the city of Windhoek to build a new wastewater treatment plant using membrane technology, and to outsource the operation to a consortium comprising Veolia Water, Berlinwasser and VA Tech Wabag (Austria). The Goreangab plant is a first and unique example of recycling domestic sewerage water into potable water to face water scarcity problems and entered service in 2002. The turnover of Wingoc is approximately €2 million pa, producing 21,000m ³ of water per day, some 30% of the city's total water requirement. In addition, BWI has an O&M contract for the city of Swakopmund’s sewage treatment works, which have a capacity of 10,000m³ per day. Other contracts directly held by VE

1995 Döbeln/Oschatz 20 year management 135,000 water and sewerage Oewa (46% held by VE, a JV with Veba Kraftwerk Ruhr AG until 1998) gained a contract for Döbeln/Oschatz in Saxony with a turnover of (DM17 million), serving 135,000 people.

1999 Grimma 25 year concession 85,000 water and sewerage The concession covers 19 communes in Saxony, 85,000 being served with piped water and 45,000 with sewerage. The contract is worth €153 million over its life. Oewa Wasser und Abwasser GmbH mainly operates in Saxony-Anhalt, holding 25 contracts, including 6 gained via the 1994 acquisition of Awatech.

1999 Midewa Acquisition 400,000 water & sewerage In December 1999, activities in Saxony Anhalt were boosted by the acquisition of Midewa, which has a turnover of €56 million pa. 400,000 are included for water services and 200,000 for sewerage. VE also has a 25 year O&M contract for sewerage services in the Hanover area, with a turnover of €15 million pa. 2001 Görlitz Acquisition (74.9%) 80,000 municipal services

Saxony’s Stadwerke Görlitz had a DM 120 million (€61 million) turnover in 2000. It provides waste management, water, sewerage, energy and public transport services to the town. 2003 Gera 10 year BOT 165,000 water & wastewater

The contract is with the municipality of Gera in Thuringia. Total revenues for the contract will be €130 million. Belgium 2001 Brussels 20 year BOOT 1.1million sewage treatment

Construction of the Brussels North STW is due to start during 2003, with completion in 2006. The contract is worth a total of €1 billion over its life, including €290 million in Capex and a fee of €49.6 million pa for the Aquiris consortium.



Sweden 2001 Norrtalje 10 year ‘concession’ 50,000 water & wastewater

The turnover over the life of the contract will be €25. This is the first water PPP in Sweden. Norway 2003 Oslo Construction / operation option Water treatment

This is to be the largest water treatment plant in Norway, serving some 250,000 people and costing €73 million in total. There is an option for a 20 year operations contract worth €102 million. Italy In Italy, the company is in effect managing a portfolio of operating contracts and strategic stakes.

Operations and stakes in Italy Holding Population Services Condotta Acque Potabili 20% 740,000 Water Condotte Acque Torino 18% 1,200,000 Water CGA Majority 345,000 Water SAP Majority 50,000 Water Siemec Majority 700,000 Sewerage

In March 2000, VE and Amga announced that VE would buy a 20% stake in Amga Genova Acque in return for VE's 27.6% stake in Acquedotto de Ferrari Galliera and its 24.6% stake in Acquedotto Nicolay. These stakes were valued at €48.3 million at the time. Acea’s bid for the two companies in April has resulted in the stake sale being completed, with Acque Genova and Acea’s Acque Italia working together in operating Genoa’s water and wastewater services. 75% of Siciliacque, the entity running Sicily’s water distribution system was sold to a VE and Enel joint venture in 2004 for €299 million. The 40 year concession starts in 2004 and calls for investments of €1 billion, including €300 million in the first decade and reducing leakage from 30% to 12%. 2001 Latina 30 year concession 600,000 water and wastewater

ATO de Latina covers southern Lazio’s ATO-4, serving 38 communes. A consortium of VE (40%), Enel (23%) and Acquedotto Pugliese (23%) gained the concession in July 2001, after the tendering process had been held up by a dispute over the scoring system. The concession will be worth €2 billion over its operating life. UFW needs to be decreased from 70% to 25-30% and major sewage treatment upgrades are also required. A further 500,000 tourists use the area. Hungary VE aims to increase its share of the market in Hungary from 20% to 50% in the medium term.

1994 Szeged 15 year concession 175,000 water & sewerage The Szeged contract had an Fl1.16 billion turnover (F40 million) in 1995. The 15 year contract was awarded to VE’s 100% held subsidiary Servitec, which holds 49% of Szegedi Vizmü, the holding company for the contract. Currently 60% of the city is connected to the sewerage network. The contract was gained after VE had been awarded a F200 million water treatment plant construction contract in 1992. The company has been profitable since 1996 and water consumption has been reduced by targeting leakage, installing meters and a progressive pricing policy.

1997 Budapest 25 year concession 1.9million, sewerage The management company formed by VE (35%), BWI (35%) and EBRD (30%) took a 25.1% stake in Fövarosi Csatornásási Müvek Rt., Budapest’s wastewater company. 90% of the city’s population of 2.2million is currently connected to the sewerage network. Approximately 2.4million people will ultimately be served by the contract. 200 million m3 pa of sewage are treated at two plants, 40% to tertiary standard against 20% in 1997. FCSM has a turnover of €75 million pa.



China VE’s consolidated revenues in China were €350 million in 2003. It is by some way the fastest growing market VE is involved in and is set to become VE’s largest international water services market in the medium term. VE currently serves some 12.0million people in China.

2003 Shenzhen 50 year BOT 2,200,000 water & wastewater This contract is being jointly operated with Beijing Capital Corporation (see company entry) and will generate revenues totalling €8.5 billion. 45% of the contract company is held by VE and BCG and 55% by the Shenzhen municipalities. VE is investing €390 million into the project.

2004 Beijing 20 year BOT Wastewater The Bei Yuan wastewater treatment plant will be adjacent to the Olympic Village and the contract will generate total revenues of €20 million.

2004 Zunyi 35 year concession 600,000 water Zunyi is in Guizhou Province. This rehabilitation and operation contract is being carried out jointly with Citic Pacific (see company entry) and will generate total revenues of €210 million.

2003 Qingdao 25 year BOT 1million wastewater The contract covers the operation of two wastewater treatment works to be developed in anticipation of the 2008 Beijing Olympiad. Revenues will total €110 million. The capacity of the Maidao plant will be increased from 80,000m 3 per day to 140,000m 3 per day by 2006.

2003 Beijing 20 year BOT 250,000 wastewater Veolia Water and Kerry Utilities (part of PPB of Malaysia), signed a 20 year contract to operate the Lugouqiao wastewater treatment plant, located in the east of Beijing. Total revenues will be €50 million. This is the first private sector WWTW contract for Beijing and will be financed through a World Bank loan to the Beijing municipality with VE and Kerry providing an additional €5 million. The plant will cost €40 million.

2002 Baoji BOT, 23 year 500,000 bulk water supply VE is to refurbish the city’s two WTWs and to expand their capacity. Revenues over the life of the contract will be approximately €300 million.

2002 Zhuhai BOT, 30 year 1,200,000 bulk water supply VE is to refurbish one WTW and to construct a second facility. Revenues over the life of the contract will be approximately €400 million.

2002 Shanghai 50 years, O&M 1.9million water services In May 2002, VE gained the water O&M contract for the Pudong business district in Shanghai. This is the first outsourcing contract to give a foreign company the responsibility for providing a full service offering: embracing drinking water production, network distribution and customer services. Veolia Water has bought a 50% share in a new JV company, Shanghai Pudong Veolia Water Corporation, for an amount of €266 million. At the start of operations, the contract will supply potable water to 535,000 domestic connections and 18,000 commercial and industrial customers with an average daily consumption of 1.2million m3. The entire Pudong area currently has 2.4million residents. The 50-year contract is expected to generate a turnover of over €10 billion euros during the term due to the expected substantial growth of Pudong in the coming years. The business district is forecast in the long-term to be home to 5million people.

1998 Chengdu BOT, 18 year 850,000 bulk water supply The BOT contract was awarded to Chengdu Générale des Eaux - Marubeni Waterworks (CGDEM), a JV with Marubeni (60% VE, 40% Marubeni). This is the first wholly foreign owned BOT water supply project in China. The project for Sichuan’s capital cost US$100 million, US$90 million going on the treatment plant. It supplies 460,000m 3 of water per day. Construction took 30 months and includes 27km of pipelines. Chengdu has a total population of 10million, of whom 3.2million live in the central area. The Chengdu Municipal Waterworks General Company currently only serves 1.8million people. Revenues of on average €24 million pa are forecast from 2002.



1997 Tianjin ‘Concession-type’, 20 year 3.5million water treatment This was awarded for upgrading the Lingzhuang water treatment works, which has a 500,000m 3/day capacity and is one of the Tianjin's largest facilities, providing water to one third of the 11million served by the municipality. The facility is to have its capacity increased by 250,000m 3/day in the medium term. The contract generates bulk water sales of US$15 million pa, with an agreed Capex of US$30 million for plant rehabilitation and the building of a new 13km piping network. CGE Tianjin Waterworks holds the concession, which is 55% held by a JV which is in turn 70% owned by VE and 45% held by the municipality’s Tianjin Waterworks Co. Kazakhstan VE was awarded two contracts in March 2000: (1) A 30 year water management contract for the old capital Almaty (1,250,000 people) and (2) A US$40 million contract for pipeline and pumping station renovations for the new capital Astana (300,000, to grow to 500,000). The Almaty contract never started due to delays by the Government causing VE to pull out. VE retains an industrial water services presence in the region. Republic of Korea

2004 Kumdan 23 year BOT Wastewater treatment The Kumdan WWTW is located near Inchon. The facility will have a capacity of 40,000m 3 per day and will generate consolidated revenues of €80 million.

2001 Inchon 23 year BOT 2.4million sewage treatment The Inchon contract involves US$300 million being spent on two sewage treatment works (Mansu, 70,000m 3 per day and SengDo, 10,000m 3 per day) with a total capacity of 80,000m 3 per day. The two facilities are due to enter service at the end of 2004. Indonesia

1997 Sidoarjo 25 year BOT 100,000 bulk water supply This concession is for bulk water provision to PDAM Delta Tirta Sidoarjo, the local water entity. The concession holds 95% of the equity, along with Indonesia’s PT Agumar Nusa and PT Hansa Letsari. The build and management concession will entail a capital investment of Rp130 billion, or a €4 million investment by Veolia Water. The facility will have a 20,000m3 day capacity, for 100,000 people. Philippines

1998 Manila 25 year concession Water supply and sewerage The concession serves the Fort Bonifacio area, which has been set aside as Manila’s future business district. Universal provision of all services will be undertaken, a first in the Philippines. There was an initial investment of F 200 million.

2000 Manila 25 year concession Water supply and sewerage The concession for the Clark Economic Zone is similar to the Fort Bonifacio contract. In this case, it is for a 4,400Ha site earmarked for future development, where €25 million will be spent developing the basic water and wastewater infrastructure in the first three years of the contract. Malaysia The company gained its first concession in 1994 and has made further progress by working with local companies so as to take over the operation of their concession contracts.

1994 Selangor 25 year O&M contract 1.4million water provision The Selangor contract involves bulk water provision for the entire state. This involves the management and rehabilitation of the state’s 26 water treatment plants with VE as a subcontractor to Puncak Niaga. In July 1998, VE acquired 17.8% of Intan Utilities’ (IU) equity for US$12 million. This stake was subsequently increased to 30%. There will be a transfer of O&M agreements from IU to a subsidiary of VE. IU is 25% held by Vincent Tan, who sold a 9.5% holding in IU to VE as part of the overall transaction. IU provides water to 600,000 people in Ipoh, in the state of Perak under a 26 year concession granted in 1989.



Gabon

1997 SEEG 20 year concession 450,000 utility services VE won the tendering process to acquire a 100% stake in the Gabonese public utility Société d’Electricité et d’Eau du Gabon (SEEG). In the medium term, 49% of SEEG will be placed on the local stock exchange. This is a F700 million concession for water production and electricity distribution to the three principal cities; Libreville, Port-Gentil and Franceville, including F200 million for water. Kenya VE and its local partner Saureca Space were awarded a management contract in December 1999 for water services in Nairobi. The contract involves improving basic services and reducing distribution losses from their current 50% level for some 2million people. The contract may be developed into a BOT or concession contract at some point in the future. Chad

2000 STEE Phased privatisation Up to 7million water Société Tchadienne d’Electricité de l’Eau (STEE), Chad’s water and electricity utility, is being privatised in a series of phases. From 2000-02, there will be an O&M contract generating F180 million pa. Afterwards, VE will become the majority holder in STEE through a F10 million stake and F10 million in creating the new management company for STEE. The Agence Française de Developement (AFD) provided €5.1 million and the World Bank €10 million to start this process. Morocco 2001 Tangier & Tétouan 25 year concession 1.2million water & electricity The concession serves a total of 23 districts within the two cities. VE is the lead company in a consortium comprising ONA of Morocco, SOMED (Morocco and UAE) and Canada’s Hydro Quebec. The two concessions cover water & wastewater and electricity services for 23 districts within the two cities, serving a total of 1.2million people. The Tangiers contract will generate revenues of €66 million pa from 2001 and the Tetouan contract will generate revenues of €39 million. By the fifth year, they will generate combined revenues of €130 million pa. The concessions involve network and service maintenance, with an emphasis on extending and rehabilitating sewerage services. The concessions will also be designed to take into account the population growth anticipated over the duration. 1999 Rabat 30 year concession 1,700,000 water & sewage The €4.6 billion utility privatisation for Rabat and Sale was awarded to Redal, Dragados’ consortium with Electricidade de Portugal and Pleiade (Portugal) and Alborada (Morocco). Rabat’s utilities serve 1.7million people, with a €138 million (US$130 million) turnover for water, sewerage and electricity services in 1998. 84 million m3 of water was delivered in 2000. Dragados sold its stake to VE in November 2002. MD700 million (€64 million) will be invested in the area in 2003, including MD350 million in was tewater treatment facilities, concentrating on a new WWTW in Skhirat. Israel 2001 Ashkelon 25 year BOT 700,000 water desalination

VID Investment Consortium, comprising VE, IDE and Dankner of Israel gained the BOT contract. VE will hold 50% of the construction company’s equity and a majority of the operating company’s equity. The contract covers the construction and operation of a 50 million m3 per annum facility, the largest membrane sea water desalination plant in Israel. Total revenues will be €900 million, with the plant costing US$110 million to build. The provision price of US$0.527 per m 3 was well below expectations due to new technologies purchased by VE and a relatively low cost of capital. The facility was due to enter service in 2003 with full capacity in mid to late 2003. Niger 2001 Major cities 10 year renewable lease 600,000+ water

VE has been awarded a 10 year renewable lease contract for water services for major cities in Niger. VE will hold 51% of the equity and will spend €5.5 million in service extension and installing water fountains while the World



Bank is leading a group of backers for a €35 million infrastructure rehabilitation programme. The first aim will be to increase the number of connections from 58,000 over the next five years. Niamey (600,000 people) is the initial target area, with other addressable markets to be covered later. The contract will be worth a total of €150 million and aims to serve 1million people when fully operational. Burkina Faso 2001 Ouagadougou 5 year support services 900,000 water VE, along with local companies Cabinet Mazars and Guerard was awarded a five year support services contract supported by the World Bank to expand services for the city aiming to cover 0.9million people. Australia and New Zealand United Water is a venture between Thames (47.5%), VE (47.5%) and Australia’s Kinhill Engineers (5%). It was set up as part of the Adelaide contract, in order to secure business for the state in other parts of Australasia. Australia

1995 Adelaide 15 year BOT 1.2million water & sewerage This was the first contract gain by the TWI/VE UW alliance. The project involves A$650 million of construction work and the concession will be worth A$1.5 billion over its life. The contract involves the construction and operation of six water treatment plants and four sewage treatment plants and allied distribution infrastructure. The first phase entered service in 1996. New Zealand

1997 Papakura 30 year BOT 40,000 sewerage Papakura is an urban district of Auckland. The A$12million contract was awarded to UW in 1997.

2002 Ruapehu 10 year O&M 40,000 sewerage In November 2002, UW started a 10 year O&M contract with the Ruapehu District Council, a rural region of approximately 15,000 residents located 320km south of Auckland. The contract covers rural water and wastewater treatment facilities, 117km of water pipes, 97km of wastewater pipes, 3,670 wastewater connections, 4,570 water connections and 38km of stormwater pipes.

2004 Thames -Coromandel 10 year O&M 25,000 water & sewerage Thames -Coromandel District is in the North Island. It has a residential population of 25,000 rising to 150,000 during the summer. There are 14,650 water and 18,100 wastewater connections. Latin America Turnover for Proactiva Medio Ambiente, was €443 million in 2000, with net profits of €7.3 million. Revenues have been impacted by currency weakness and fell to €145 million in 2002. This has been further reduced to €34 million in 2003 due to the non-renewal of a number of contracts, most notably for Puerto Rico. Argentina 2000 Catamarca 30 year concession 200,000 water

Proactiva Medio Ambiente was awarded the contract in April 2000 for water supply management for the departments (parts of the town) of Capital, Vallejo Viejo and Fray Mamerto Esquiú in the province of Catamarca, in the northwest part of the country. Revenues over the concession will be Ptas60 billion. Capital spending will be Ptas 7 billion. The contract has been affected by poor billing. Venezuela 1997 Monagas 30 year concession 552,000 water

Proactiva Medio Ambiente Venezuela gained the Hidrocapital concession for the water supply and sewerage for the north east sector of Caracas in July 2002. It is a 2 year contract which could be extended. The served population is 650,000 inhabitants. Forecast revenue is US$2 million per year.



Colombia

1998 Bogotá 20 year BOT 2.5million water This is the contract for upgrading and expanding the TIBITOC water treatment works in consortium with 2 local partners. The contract involves US$78 million in investment, US$52 million in the first 3 years. Total contract revenues will be US$300 million. The plant has a capacity of 1million m3/day and can serve 5million people. Currently it is producing 500,000m 3/day serving some 2.5million people. 1997 Tunja 10 year concession 120,000 water 1999 Monteria 20 year concession 263,000 water

The Monteria concession was gained by Proactiva Medio Ambiente in December 1999 and will generate Ptas29 billion in revenues, with Ptas10.5 billion in investments over the contract life. Brazil

1998 Parana Strategic stake acquisition 7.3million water & sewerage The operating consortium paid R$249.8 million (US$217 million) for 30% of Sanepar, the water and sewerage company serving the state of Parana, with VE holding a 35% stake in the consortium. This is Brazil’s fourth largest water utility. Parana borders Argentina and is seen as a growth region in Brazil. Paranasan, a water and sewerage project is to be completed in 2003 at a cost of US$430 million. This includes a new water treatment plant for 220,000 residents and several sewerage projects for 321,000 residents. Sanepar provides waterworks services to a total of 7.3million inhabitants in 616 state localities and provides 98.4% of the population with drinking water and 37.2% with sewerage services. VE lost management control of the operating company in 2003, and is having its stake diluted. Mexico VE’s JV company Omsa, operates four contracts serving a total of 7.8million people. Since 1993, VE’s stake in Omsa has increased from 33% to 38% in 1996, to 45% in 1997 and to 50% in 1998. ICA, VE’s partner, is a Mexican civil engineering and construction company. Caasa serves 506,000 people in the city and a further 300,000 in the surrounding areas. The 30 year concession was granted in October 1993. Sapsa (Mexico City) 2.43million Water management services Caasa (Aguascalientes) 0.85million Water and waste water concession Puebla 1.20million Water and waste water concession Acapulco 1.5million Water and waste water concession

USA US Filter’s (USF) involvement in PPP's go back some 30 years to the first partnership for water services in the USA. The management contract for Burlingame’s (CA) wastewater treatment facilities remains in USF’s hands. Upon the purchase of US Filter by Veolia Environnement in 1999, US Filter and the former Professional Services Group of Aqua Alliance were merged to create North America’s largest water and wastewater outsourcing company, serving more than 600 communities and thousands of companies across all industrial and commercial markets through 400 water and wastewater treatment plants. According to Public Works Financing, US Filter has been the North American market leader in public-private partnerships in recent years. Following the sale of the non-core activities, USFilter Operating Services has been renamed Veolia Water North America (VWNA). In total, some 14million people are served to some degree by the company. USA activities

(US$ million) 2001 2002 Municipal outsourcing services 319 352 Industrial outsourcing services 270 318 Total 589 670

Sources: PW Financing, March 2003



2004 Virgin Islands 20 year BOT 75,000 wastewater treatment Two 18,000m 3 per day wastewater treatment facilities are to be constructed at St. Croix and St Thomas. Both facilities are expected to enter service at the end of 2006, generating revenues of US$126 million throughout their contracts. There is also a five year renewal option.

2002 Indianapolis, IA 20 year O&M 1.1million water treatment At US$1.5 billion, it is the largest PPP in the United States’ history. The system produces an average of 143million gallons a day for residents in the city and within a 25 mile radius around the city.

2002 Atlanta, GA O&M Manage city-wide biosolids system US$200 million agreement to produce and market 100 dry tonnes of biosolids per day. VWNA is the leading biosolids services supplier in the U.S., serving 130 different communities. VE in industrial outsourcing 21% of VE’s water turnover in 2000 was with industrial clients, which rose to 28% by 2003. VE’s industrial outsourcing contracts have a typical duration of between 3 and 10 years, although an increasing number of contracts now run for 15 or 20 years. Overall revenues rose by 30% in 2003 to €400 million. During 2003-04, Veolia Environnement signed several multiservice contracts (water, waste and energy) with industrial customers for cumulative revenues of around €1.25 billion. Veolia Environnement’s multiservice customers include Arcelor, Aventis, BP, Novartis, PSA, Renault, Solvay and Total. Industrial outsourcing in the Americas In the US, USF enjoyed a 53% market share for identified industrial water and wastewater outsourcing services in 2002, according to Public Works Financing. Major recent developments include a 20 year, US$66 million) contract with Alon, USA, to manage the water, wastewater, sludge and groundwater facilities at its Big Spring, refinery in Texas and the acquisition of MCS Technologies LLC, a leader in the refinery waste separation and treatment services market, based in Corpus Christi, Texas. The 15 year IPSCO Steel contract was gained in 1999 while the US$100 million Sunoco contract was gained in 1998. Contracts gained in 2000 include Westlake (15 year, US$75 million), Conoco (US$30 million), GM (US$30 million) and BP (US$1.3 million). In 2001, VE gained a €300 million 15 year industrial services contract for Usinor’s Vega do Sul facility in Brazil. In 2003, USFilter gained contracts with the Dupont and Kerr-McGee chemical and energy groups for terms between 15 and 20 years with an aggregate estimated total revenue of more than US$100 million. Industrial outsourcing in Europe Veolia Water Industrial Outsourcing provides water and wastewater management services to industrial customers in the UK and Ireland. Contracts include a 10 year contract with Shell to supply all of their chemical and oil refineries on site with up to 3,500m 3/day of softened water on a DBO basis, and a 10 year O&M contract with Mettis Aerospace (the aerospace component manufacturer) regarding its effluent treatment plant as well as to supply its manufacturing operations with recycled process water. During 2002, a €27 million 15 year contract with Arcelor Packaging and a €11 million 12 year contract with Smurfit Cellulose du Pin were gained in France, both for effluent treatment. In October 2001 VE acquired Depurazioni Industriali (DI) from Italy’s Montedison. DI specialises in the treatment of industrial waste water, and generated €8 million in revenues in 2001. The company owns three plants where it treats effluent from three industrial sites operated by Montedison’s Cereol and Novaol under 20-year management contracts, along with effluents from third parties. VE also reached a partnership agreement with the Montedison group for a three year exclusive right between Veolia Water and the four companies (Cereol, Cerestar, Provimi and Beghin Say) resulting from the 2001 Eridania Beghin Say contract, covering the outsourcing of water management at over 50 industrial sites throughout Europe. VE believes that the industrial water outsourcing service market in Italy is worth €300 million. In the Czech Republic, a €20 million 10 year contract with Spolchemi involving the design, construction and operation of an effluent treatment plant was signed in 2001. In 2002, a €5 million, 10 year water and wastewater services contract was signed with Cutisin’s Jilemnica, a subsidiary. In September 2003, Veolia Water gained an industrial services contract with Synthesia, a member of the Unipetrol Group covering the operation of Synthesia’s wastewater treatment facility. The 200,000 PE plant also treats wastewater from the city of Pardubice (population of 100,000 in eastern Bohemia), where the company is located. The 10 year contract will generate revenues of €90 million. In addition, Veolia Water signed a contract in Hungary with Hajdú-Bét, a major poultry slaughterhouse located in Debrecen, in the east of the country. The 3 year contract covers the operation of a wastewater pre-treatment plant and will generate revenues of €1 million.



Other contracts gained in 2003 included Johnson Matthey (United Kingdom) MD Papier GmbH & Co. (Germany), and Grande Paroisse S.A. (France, a subsidiary of the Atofina Group). Total revenues for these contracts will be €57 million. A €60 million 10 year contract was gained in March 2004 by VE’s Globalis GmbH for environmental services at Visteon’s German site in Duren. This was the first multi service contract awarded in Germany. Outsourcing in Asia Malaysia In September 2002, VE signed a contract with Petronas for outsourcing services in water treatment and supply at the Kertih petrochemical complex in Malaysia. The 20 year contract does not involve any investment on the part of Veolia Water. The company will operate a potable water production plant with a capacity of 250,000m 3/day and a distribution network serving customers such as BP Chemicals, Mitsui and Union Carbide, which work with Petronas in the petrochemical complex. The contract will generate revenues of €200 million over its lifetime The US$1 billion Hyundai Petrochemical’s Daesan contract (January 2000) runs for 20 years. The Hynix Semiconductors Corporation 12 year €900 million contract for Hyundai of Korea is the largest industrial water outsourcing contract in the world to date. The contract calls for four ultra-pure water plants and two WWTWs. VE is acquiring the company’s water and wastewater facilities for €196 million and will generate €830 million in revenues over the next 12 years. The 10 year effluent management contract for Millennium Chemicals signed in 2001 is worth €165 million. Thailand Global Utilities Services Co. Ltd (Thailand) is a JV between Veolia S.Napa (49%), Industrial Estate Authority of Thailand (49%), and the IEAT Provident Fund (2%). GUSCO currently has 8 industrial water management contracts in Thailand, including Sony, Egco, GM and Ford, with a Bht900 million (US$21.2 million) turnover or US$2.65 million pa per contract. Contact Details

Name: Veolia Environment SA Address: 42 Avenue de Friedland, 75008 Paris, France Tel: +33 1 71 71 10 00 Fax: +33 1 71 71 11 79 Web: www.veoliaenvironnement.com

www.veoliawater.com Web: www.generale-des-eaux.com Henri Proglio (Chairman and CEO) Jerome Contamine (CFO) Antoine Ferot (Director, Water Division)

GERMANY PART 3: COMPANY ANALYSIS


GERMANY E.ON E.ON was founded in June 2000 through the merger of VEBA and VIAG, two German regional power utilities. It is the world’s largest privately held power utility. EO.N’s water activities are grouped under E.ON Aqua, part of E.ON Energie AG. E.ON’s 80.5% holding in Gelsenwasser (See separate entry) was sold to the municipalities of Dortmund and Bochum in August 2003 for €835 million, at a profit of €500 million, on the order of the German Cartel Commission as a result of its acquisition of Rhurgas due to Gelsenwasser’s natural gas activities. E.ON, profit and loss account

Y/E 31/12 (€million) 2000 2001 2002 2003 Turnover 88,858 37,273 36,624 46,364 Pre-tax profit 6,498 3,201 -720 3,950 Net profit 3,678 2,570 2,777 4,627 Earnings per share (€) 5.07 3.81 4.26 7.11 Dividends per share (€) 1.35 1.60 1.75 2.00

E.ON Aqua has a broad portfolio of water investments, generally at or below the 50.0% equity holding level and therefore not consolidated. 28 water and wastewater entities were held by the company at the end of 2003, along with a significant number of municipal Stadwerkes. Examples include:

Company Location Stake Harzwasserwerke GmbH. Hildesheim 20.8% Wasserwerk Gifhorn BG Gifthorn 49.8% Abwasserentsorgung Bleckede GmbH Bleckede 49.0% Abwasserentsorgung Schoppenstedt GmbH Schoppenstedt 49.0% Wasser und Abwassergellschaft Vienenburg mbH Aachen 49.0% Stadtische Werke Magdeburg GmbH Magdeburg 26.7%

Water activities (€million) 2001 2002 Water turnover 245 267 Operating profits 47 55 Capital spending 196 48

E.ON Aqua has had a very low key existence since the Gelsenwasser divestiture. Turnover is likely to be in the region of €70-80 million. Contact Details Name: E.ON Address:

E.ON-Platz 1, D-40479 Düsseldorf, Germany

Tel: +49-211-4579-0 Fax: +49-211-4579-501 Web: www.eon.com Dr Wulf Bernotat (Chairman) Dr. Hans Michael Gaul (CEO) Dr. Erhard Schipporeit (Finance Director)



GELSENWASSER AG Gelsenwasser is a water supply company operating in North Rhine Westphalia, and until the privatisation of Berlin Water, was the largest and oldest water company in Germany. In 1887 it was awarded the contract for the operation of Gelsenkrichen’s water provision services. In 1997, this contract was renewed to 2027. Gelsenwasser serves 400 industrial customers and 1.4million people directly, 1.5million people via other water suppliers and 2.6million through its subsidiary companies. The company is developing its presence in the Eastern Länder and central and eastern Europe. E.ON 80.5% stake in Gelsenwasser was sold to the municipalities of Bochum and Dortmund for €835 million in 2003. The municipalities have been seeking to sell at least 25% to another company, and have held talks with various players during 2004. Gelsenwasser AG, profit and loss account

Y/E 31/12 (€ million) 1999 2000 2001 2002 2003 Water 200.1 195.4 194.6 191.1 196.2 Gas 118.5 148.6 182.3 171.0 180.9 Other 23.5 19.1 16.7 19.7 19.7 Revenues 342.1 363.1 393.6 381.8 396.6 Operating profits 53.1 45.5 49.0 36.4 52.6 Net profits 25.4 40.5 37.9 39.7 47.2 Earnings per share (€) 7.39 11.79 11.03 11.55 13.73

The company has some €337 million earmarked for capital spending until 2008, including €117 million for water infrastructure upgrading and maintenance and €153 million for business expansion. . Gensenwasser, populations served

Country Water Sewerage Total Germany 4,650,000 1,080,000 5,730,000 Hungary 150,000 150,000 150,000 Czech Republic 96,800 96,800 96,800 Poland 74,000 74,000 74,000 Total – home markets 4,650,000 1,080,000 5,730,000 Total – international 320,800 320,800 320,800 Grand Total 4,970,800 1,400,800 6,050,800

Water services are via direct water supply on behalf of municipalities, the sale of water to industrial users (mainly in coal mining and steel manufacturing) and the resale of water to neighbouring utilities. Household sales are broadly stable or showing a slight decline as water conservation measures gain in popularity. Prices for domestic water have remained constant at €1.37 per m3 since 1997.

Y/E 31/12 (million m3 pa) 1999 2000 2001 2002 2003 Gelsenwasser AG 212.4 206.8 197.2 189.4 195.5 VGW 6.6 6.8 6.7 6.8 7.1 NGW 34.2 30.6 32.4 33.4 37.6 Gelsenwasser Group 253.2 244.2 236.3 229.6 240.2 Sales to industrial customers - - 91.4 88.6 97.9 Sales to domestic customers - - 65.3 64.5 65.5 Sales to other utilities - - 79.6 76.5 76.8 Consolidated activities 247.4 238.5 236.3 229.6 240.2 Wastewater treatment: Hanse Wasser (million m 3) 66.4 68.1 78.2 77.2 80.7 Hanse Wasser (revenues) - - - 153.3 156.8

3,700 new domestic customers were gained in 2003, along with a metalworking company moving into its operational area (4.5million m3 pa). The population of the company’s core operating area is forecast to fall by 350,000 by 2015, hence the geographic diversification strategy. Gelsenwasser has three main 100% held subsidiaries involved in water and sewerage service provision. Vereinigte Gas und Wasserversorgung GmbH (VGW) and Niederrheinische Gas und Wasserwerke GmbH (NGW), which operate in Gelsenwasser’s region. NGW was acquired in 1973, while VGW was incorporated by Gelsenwasser in 1968. VGW supplies water to 21,848 customers, or 118,500 people in four municipalities. AWS Abwassersysteme GmbH (AWS) specialises in sewerage contracts. AWS is still at the start up stage, with one sewage treatment work construction project awarded and a 1998 turnover of DM9.3 million. Otherwise, the company believes that in Western Germany it has suffered from the fiscal discrimination against awarding service contracts to the private sector. Gelsenwasser holds 34% of Abwassergesellschaft Gelsenkrichen GmbH, which is responsible for the operation of the city of Gelsenkrichen’s sewage disposal operations, serving 280,000 people. This represents a return to the company’s origins, handling all aspects of the city’s water cycle.



In 2004, Gelsenwasser gained the partial privatisation of the waste-water operations for Stadtentwässerung Dresden, the state capital of Saxony, with 480,000 inhabitants, around 26million m³ of wastewater will be disposed of.

Wasserbeschaffung Mittlere Ruhr GmbH (WMR), Bochum

WMR is jointly held (50% each) by Stadtwerke Bochum GmbH (commercial management) and Gelsenwasser (technical management) under a 1971 agreement covering water supply to the city of Bochum and Gelsenwasser’s supply territories south of the River Ruhr. Water is supplied by Gelsenwasser’s Essen plant and Wasserbeschaffung Mittlere Ruhr GmbH’s Stiepel waterworks.

FY 31/12 (€ million) 2001 2002 Sales 9.4 9.2 Water provision (million m 3) 31.5 30.4

Wasserversorgung Herne GmbH (WVH), Herne

The company (50% held by Gelsenwasser and 50% Stadtwerke Herne AG) was formed in 1961 after Gelsenwasser had provided waster to the municipality for some decades via franchise contracts.


Wasserversorgung Voerde GmbH (WVV), Voerde A 1994 joint venture (50% each) between NGW and the municipality, providing water to 15,341 households in Voerde. Drinking water is sourced exclusively from NGW's Bucholtwelmen Waterworks.


Wasserwerke Westfalen GmbH (WWW), Dortmund Formed in 2000 as a joint venture (50% each) between Gelsenwasser and Dortmunder Energie- und Wasserversorgung GmbH (DEW), serving DEW in Westhofen, Ergste, Villigst, and Hengsen and for Gelsenwasser in Witten, Echthausen, and Halingen. The contract is designed as an open option for further expansion.

FY 31/12 (€ million) 2001 2001 Sales 34.1 33.4 Water provision (million m 3) 117 112

In August 2001, a 20 year contract was gained for supplying 1.2million people in 400,000 households in Bochum and Hamm, Iserlohn and Sendenhorst. Wasserwerke Westfalen GmbH (WWW) abstract and Gelsenwasser (50%) with Dortmunder Energie und Wasserversorgung GmbH (50%) distribute the water. Up to 120million m3 of water pa is delivered from eight waterworks along the River Ruhr. Hanse Wasser In 2000, Gelsenwasser formed Hanse Wasser GmbH, a 49%/51% joint venture with Stadtwerke Bremen AG, a municipal water utility serving the municipality of Bremen. Hanse Wasser gained a 74.9% stake in Abwasser Bremen GmbH, paying the city DM708 million to use the sewerage and sewage treatment network, which serves its 550,000 people in the City of Bremen and 150,000 (Lemwerder, Schwanewede, Ritterhude, Lilienthal and Oyten) Achim in the surrounding area. The network has 160,000 connections and is served by two tertiary level treatment plants: Seehausen purification plant (serving a population equivalent of 1million) and Farge (population equivalent of 150,000). 43.9million m 3 of wastewater was treated in 1999. Hungary

2001 Miskloc 20 year concession 150,000, Water & wastewater Gelsenwasser holds 49% of the equity of Borsodviz Rt., a regional utility providing water and wastewater services to 109 municipalities in Miskloc in the Borsod region. The municipality holds 51% and an annual turnover of DM12 million is anticipated.



Poland

2002 Miskloc 20 year concession 74,000 water & wastewater 46% of PwiK w Glogowie Sp zoo (PwiK) was acquired in 2002.

Czech Republic NGW holds 29.86% of Chevak Cheb a.s. with the remainder being held by local municipalities. The company provides water and sewerage services to Cheb, Mariánské Lázne, Ash, Františkovy Lázne and surrounding municipalities (total population 87,800). It was founded in 1994 and NGW acquired its stake in 1998.

FY 31/12 (CZK million) 2000 2001 2002 Sales 188.3 201.0 226.1 Water provision (million m 3) 6.0 5.8 5.7 Wastewater treated (million m3) 5.6 5.6 5.7

In 1999, NGW acquired 50% of KMS Kraslickla Mestska Spolecnost s.r.o., which provides water, wastewater and heating services to 9,000 people in the town of Kraslice, near Pilsen. 50% of KMS’s shares are held by the municipality. A new wastewater treatment plant entered service in 2003. Industrial water and wastewater services Rhur Oel, Gelsenkirchen: A ten year lease contract with Rhur Oel GmbH and Veba Oel Verabeitungs -GmbH was signed in July 2002. Two 4m 3 per hour wastewater treatment plants (0.7million m3 pa) are operated, with an investment of €4 million and total revenues of €9 million. Ciba Speciality Chemicals, Grenzach: Ten year contracting agreement to supply desalinated industrial process water to the Rhineland facility. There is an option to extend this to other facilities. Krupp Thyssen Nitrosda, Dusseldorf: Operation of a pilot plant for the dewatering of slurry from the company’s speciality steel production unit. Henkel and Stora Enso, Dusseldorf: Operation pilot plants for the advanced treatment of paper manufacturing was tes generated at the Stora Reishoz facility and chemical manufacturing wastes for the Henkel facility. Agust Storck KG, Halle / Westphalia: 10 year BO for a 1,300m 3 per day tertiary wastewater treatment plant running from the plant entering service at the end of 2004. Contact Details Name: Gelsenwasser AG Address:

Willy-Brandt-Allee 26, 45891 Gelsenkirchen, Germany

Tel: + 49 209 7080 Fax: + 49 209 708 650 Web: www.gelsenwasser.de Prof. Dr-Ing Harmut Griepentrog (Chairman) Dr Bernhard Hörsgen (Management Board) Hans -Peter Villis (Management Board)



MVV AG Mannheimer Versorgungs und Verkehrsgesellschaft mbH (MVV) was corporatised in 1974 and partially floated in 1998. 73% of MVV is held by the municipality and 15% by Rhurgas AG. The free float is to be increased to 25% through increasing the company’s issued equity in 2005. As well as water, MVV provides gas, energy, waste-to-energy, district heating and mass transit services. MVV provides water services to 375,000 people within the city of Mannheim and adjacent municipalities. Water deliveries increased from 35.0million m 3 in 2000-01 to 38.7million m3 in 2001-02 and 41.9million m 3 in 2002-03. MVV, profit and loss account

Y/E 31/09 (€million) 1999 2000 2001 2002 2003 Water turnover 39.8 37.9 58.1 66.8 74 Group turnover 562.5 649.0 1,179.8 1,678.7 1,695 Water operating profit N/A 6.0 6.6 9.5 11 Group operating profit 78.7 79.7 73.0 99.7 Group net income 33.3 48.4 38.4 50.4 Earnings per share (€) 0.66 0.95 0.51 1.00 3.01

Since 2000, 49.9% stakes in Energieversorgung Offenbach AG (Offenbach in the state of Hesse) and Stadtwerke Solingen GmbH (Solingen in North Rhine-Westphalia) have been acquired. In June 2003 Energieversorgung Offenbach gained a 25 year O&M contract for water and wastewater operations for the parish of Mainhausen in the border region between the states of Hesse and Bavaria. MVV, breakdown of 2002-03 water revenues

Region Water revenues % Population served Energie (Mannheim) 42 59% 375,000 Offenbach 21 26% 119,000 Sollingen 11 15% 165,000

In April 2004, MVV Energie acquired 51% of Stadwerke Kiel from TXU Germany Ltd., a subsidiary the American electric power concern TXU. The company provides water and sewerage services to 380,000 people in the city, 26.8million m3 pa for water (1999) and 23million m3 pa for wastewater. Kiel is the capital of Schleswig-Holstein. Stadwerke Kiel generated revenues of €292 million in 2002 for a range of utility services and net earnings of €23.5 million. Including the Kiel acquisition, MVV now provides water and wastewater services to approximately 1.05million people in Germany. In January 2004, MVV sold its 33% stake in AquaMundo to Inframan, a subsidiary of Saudi Arabia’s Amiantit. MVV continues to be involved in international consulting projects and short term asset management and rehabilitation projects in developing economies. Contact Details Name: MVV Energie AG Address: Luisenring 49, 68159 Mannheim,

Federal Republic of Germany Tel: +49 621 29 00 Fax: +49 621 2860 Web: www.mvv.de Dr Rudolf Schulten (CEO) Karl-Heinz Trautmann (Board) Dr Werner Dub (Board)



RWE AG RWE is the largest of the German multi-utilities. In the late 1980s, the company began to develop RWE Umwelt AG into one of Europe’s largest waste management companies. In the mid 1990s, the company set up RWE Aqua as a subsidiary of Umwelt, to exploit the opening up of the water and wastewater markets in Germany and in central and eastern Europe. RWE sought to become the third largest European water company by 2005 and achieved this by 2000 through its agreed bid for Thames Water. As a result of the September 2001 bid for American Water Works, RWE is now the third largest water utility company globally and the market leader in Germany, the UK and the USA. The company is organised into four regions, with a corporate office in Reading, near London in the UK. The Americas region, covering North America, South America and the Caribbean, is based in Vorhees, New Jersey in the United States. The German, Poland and Hungary has its headquarters in Mülheim in Germany and is part of RWE Energy. The UK and Ireland and rest of Europe region is headquartered in Reading. The International activities (Asia Pacific and Turkey and the Middle East) are also based in Reading. In 2004, RWE decided to concentrate on its European and American activities and is considering the fate of its other contracts. Population served (million)

2001 2002 2003 Americas 5.3 5.4 21.2 Asia Pacific 8.8 13.8 12.2 Europe, ME & Africa 15.2 19.8 22.0 UK & Ireland 14.9 15.0 14.6 Total 44.2 54.0 70.0 Billion M3 pa Water supplied 2.8 2.2 4.9 Wastewater treated 1.3 1.3 3.0

RWE AG, profit and loss account*

Y/E 30/06 (€ million) 2000 2001 PF 2002 2003 Turnover 47,918 50,366 46,633 43,875 Pre-tax profit 2,151 2,194 2,722 2,123 Net profit 1,212 1,350 1,050 936 Earnings per share (€) 2.24 2.40 1.87 1.69

*Year end changed from 31st December in 2001; 2001 figures are pro forma.

FY 31/12 (€ million) 2001 2002 2003 Turnover – Thames NA 1,719 1,603 Turnover – Europe & ROW NA 2,439 2,335 Turnover – Americas NA 411 1,914 Total turnover 2,746 2,850 4,249 Operating profit 865 963 1,374 Capital spending 2,643 2,182 6,129

Subsidiary companies

FY 31/12/2003 (€ million) Revenues Net profit Thames Water (UK) 1,115 145 American Water Works (USA) 1,818 153 E-town Corporation (USA) 211 25 Pridesa Group (Spain) 78 -1 RWW (Germany) 97 9

Agreed bid for American Water Works and Thames Water In September 2000, Thames Water accepted a €7.1 billion bid by RWE. In December 2000, Thames became RWE’s water arm and took over RWE Aqua. In September 2001, RWE agreed to buy American Water Works (AWW) for US$4.6 billion plus taking on AWW’s US$3.0 billion in debt. Regulatory approval was gained in January 2003.



RWE, breakdown of populations served

Country Water Sewerage Total England, Scotland and Wales 7,360,000 13,650,000 13,650,000 Germany 11,500,000 6,200,000 13,200,000 Spain 1,300,000 2,100,000 3,100,000 Albania 550,000 550,000 550,000 Hungary 1,950,000 1,500,000 1,950,000 Croatia 0 750,000 750,000 Poland 135,000 135,000 135,000 Australia 1,315,000 1,200,000 1,315,000 New Zealand 25,000 105,000 105,000 Malaysia 2,760,000 0 2,760,000 Thailand 1,200,000 0 1,200,000 Indonesia 3,500,000 0 3,500,000 China 2,900,000 2,500,000 5,400,000 Turkey 1,200,000 0 1,200,000 UAE (Ajman) 0 200,000 200,000 Puerto Rico 1,600,000 0 1,600,000 USA * 15,300,000 2,130,000 16,100,000 Chile 2,740,000 2,410,000 2,740,000 Total - home markets 18,860,000 19,850,000 26,850,000 Total - international 36,475,000 13,580,000 42,605,000 Grand total 55,335,000 33,430,000 69,455,000

Germany RWE Energy is responsible for the water business of RWE in Germany and Hungary and Poland. In 2000, it was split from RWE Umwelt and merged with Thames Water. RWE Aqua gained the Budapest water concession in 1997 and acquired 22.5% of Berlin Water in 1999. Budapest was jointly with Suez and the latter jointly with VE. RWE Aqua had a total turnover of €808 million in 2000 due to the Berlin Water acquisition. RWE Aqua serves 13.2million people in in ten German states. Berlin and Essen and has stakes in the following entries: Hastrabau (Langenhagen), SEG (Schwerte), Ruhrwasser (Essen), WVN (Essen), MKW (Frankfurt), WRH (Ludwigschafen), envia aqua (Chemnitz) and W&A Holzland (Hermsdorf)), DAR (Aachen, Trier, Weisbaden, Mannheim and Berlin) and ARGE (KRW (Neuweid), KAWAG (Ludiwigsburg) and LEW (Augsburg). RWE Aqua acquired the majority stake in RWW (Rheinisch-Westfälische Wasserwerks -gesellschaft GmbH) in Mülheim an der Ruhr in April 2002. RWE was one of the founding members of RWW in 1912 with a 14.3% stake, which was increased to 74.9% in 2002. It was agreed with the municipal shareholders to keep the current water tariff stable until 2005. RWW has responsibility within RWE Aqua for North Rhine Westfalia, Rhineland Palatinate, Belgium, The Netherlands and Luxembourg. In September 2002 RWE Aqua acquired an additional 4.8% in RWW. RWW serves 1million people and had a turnover of €77 million in 2001. The stakes cost a combined €233 million. RWE gained control of Berlin Wasser Betriebe (BWB) in 1999 with VE. The consortium (VE 45%, RWE 45% and Allianz 10%) gaining the 49.9% stake in BWB for DM3.1 billion (€1.69 billion). The final price to be paid will depend on arbitration between BWB and Berlin over agreed rates of return. In 1999, after the partial privatisation of BWB, BWB Holdings was founded and BWB was vested into this company. Berliner Wasserbetriebe

Y/E 31/12 (€million) 2000 2001 2002 2003 Turnover 1,116 1,101 980 998 Net profit 20 116 NA 116 Capital spending 367 447 250 NA

BWB dates back to 1856, including 45 years with its services being divided by the Berlin Wall. In 1999, after the partial privatisation of BWB, Berlinwasser Holding AG was formed and BWB was vested into this company. The consortium (VE 50% and RWE 50%) acquired 49.9% of €1.69 billion, with the majority 50.1% stake being held by the City of Berlin.



1999 Berlin 30 year concession 3.9million water and sewerage BWB serves 3.5million people in Berlin and 0.4million in Brandenburg, with nine water treatment works and six sewage treatment works. In 2001, 215million m3 of drinking water was provided, along with 238million m3 of wastewater from Berlin and the surrounding area was treated Berlinwasser International AG BWB sought to enter international markets in 1994 and gained its first activities in 1997-98. Berlinwasser International has nine projects in five countries with a total order backlog worth €495 million in 2003. China 2003 Nanchang 20 year BOT 1million wastewater

Berlinwasser International has a BOT-contract to build a 330,000m 3 per day wastewater treatment plant in Nanchang, the capital of Jiangxi. BWI and its partner, the Third Construction & Engineering Co. Ltd of Beijing Urban Construction Group (BUCGT) are developing the €36 million project with a wholly Chinese project-financing. Construction began in January 2003 and commissioning is planned for autumn 2004. Berlinwasser also has a 35% stake in a BOT water project signed in 1997 with the Xian Water Company covering a 550,000m 3 per day water treatment plant that was commissioned in November 2001 and supplies water to 2million people in the city of Xian. In December 2003 Berlinwasser sold its equity interest in Waterworks Xian South Co. Ltd. to the majority shareholder, the water enterprise of Xian, China for US$11.2 million due to the Chinese governmental decree of 11th September 2002. Albania 2003 Four Albanian towns 5 year O&M 450,000 water & wastewater

Berlinwasser International gained a five year €4m contract to take over management of water supply and wastewater disposal in the Albanian towns of Durres, Fier, Lezhe and Saranda. The project is supported by €20 million in funding from the World Bank and will be implemented by a JV between BWI (60%) and Aquamundo (40%). Sewage treatment will be upgraded to secondary (biological) standards and water supplies will be improved from two to four hours daily to a 24 hour supply.

2002 Elbasan 30 year Concession 100,000 water & wastewater Berlinwasser (97.5 %) and Rodeco Consulting (Germany) (2.5 %) operates Elber Sh.p.k., a 30 year concession for water supply and wastewater disposal in Elbasan, with 100,000 inhabitants. Water is supplied for four hours a day and will be improved to a 24 hour service. Hungary

1997 Budapest 25 year concession 1.9million sewerage The management company formed by VE (35%),BWI (35%) and EBRD (30%) took a 25.1% stake in Fövarosi Csatornásási Müvek Rt., Budapest’s wastewater company. 90% of the city’s population of 2.2 million is currently connected to the sewerage network. Approximately 2.4million people will ultimately be served by the contract. 200million m3 pa of sewage are treated at two plants, 40% to tertiary standard against 20% in 1997. FCSM has a turnover of €75 million pa.

1997 Hodmézövásarhely 25 year concession 50,000 sewerage Zsigmondy Bela Rt. Manages the concession agreement with the city of Hodmézövásarhely. A wastewater treatment plant with a capacity of 30,000m³ per day has been upgraded to comply with the UWWTD. Azerbaijan

2001 Imisli 10 year Lease Contract 50,000 water Waterworks Imisli JV Ltd is a joint venture between BWI and the city of Imisli’s water company. The city’s water treatment works were rehabilitated and expanded in 2003, with provision rising from two hours a day to 15 along with a 57% tariff collection rate.



Namibia 2001 Windhoek 20 year operation 240,000 water & sewerage

Limited water resources and rising water demand encouraged the city of Windhoek to build a new wastewater treatment plant using membrane technology, and to outsource the operation to a consortium comprising Veolia Water, Berlinwasser and VA Tech Wabag (Austria). The Goreangab plant is a first and unique example of recycling domestic sewerage water into potable water to face water scarcity problems and entered service in 2002. The turnover of Wingoc is approximately €2 million pa, producing 21,000m ³ of water per day, some 30% of the city's total water requirement. In addition, BWI has an O&M contract for the city of Swakopmund’s sewage treatment works, which have a capacity of 10,000m³ per day. Spain – PRIDESA and Onagua

2002 Pridesa and Ondagua O&M 3.1million water and wastewater Thames acquired 75% of Proyectos Y Installaciones De Desalinacion S.A (PRIDESA) and Ondagua S.A. from Iberdrola Diversificacion S.A in July 2002 for €100 million. Iberdrola will retain a 25% shareholding in each company until at least the end of 2004. PRIDESA specialises in reverse osmosis desalination and wastewater reuse systems, serving 1million people throughout Europe. PRIDESA also has extensive experience in the conventional water and wastewater sector, serving a population of over 2million. The company operates some 60 treatment plants across Europe. Total revenues in 2001 were €135 million. Ondagua is a water, wastewater and municipal services operating company and currently serves 300,000 people in Toledo, Soria and Levante regions and in towns in Murcia and Alicante, along with an O&M contract for the Aranjuez STW in Madrid. Its turnover in 2001 was €13.2 million. Hungary

1997 Budapest 25 year O&M 1.5million water distribution Suez and RWE Aqua control all the shares of the management company and 25% of the equity of the asset management company. The management company formed by Suez (51%) and RWE Aqua (49%) will take a 25% stake in Fövarosi Vizmuvek for US$82 million. RWE holds 13% of the asset company. FV has a US$80 million turnover and employs 1,500 staff. Croatia

2000 Zagreb 26 year BOT 0.75million sewage treatment This is the largest sewage treatment concession award in central and eastern Europe to date, involving €270 million in capital spending. The project scope includes design, construction and operation of the wastewater treatment plant (1million PE) and the administration facilities, construction of the main collecting pipeline (9.8km) and coverage of main drainage canal (5.5km). The concession company, Zagrebacke otpadne vode d.o.o (ZOV), is formed by RWE Aqua (48.5%), WTE Wassertechnik GmbH (48.5%, see EVN, Austria) and the City of Zagreb (3%). Construction began in July 2002 and will be completed between 2004 (mechanical treatment) and 2006 (biological treatment). Poland

2002 Gornicza 25 year concession 135,000 water & sewerage RWE acquired a 34% stake in PwiK, the municipal supplier for Dabrowa Gornicza in Silesia. The contract runs for 25 years. The partnership between RWE Aqua and the city of Dabrowa Gornicza is the first project for RWE Aqua, but also only the third privatisation project in the Polish water management. Sewage treatment coverage will be extended from 30% to 100%. United Kingdom: Thames Water Plc Most of Thames Water’s expansion over the last decade has been outside the UK, but it has won a number of UK ‘inset’ appointments, as well as two contracts in Scotland and the contract to manage customer services for Dwr Cymru Welsh Water. As a result, Thames Water now provides sewerage and customer services to the capital of Scotland, Edinburgh and the capital of Wales, Cardiff, as well as serving the British capital, London. TW provides water supply and sewerage services to 13million people in England, making it the leading UK water company. Thames Water's regulated activities are in the south-east and centre of England, including London. The company’s origins lie in the New River Company, which was incorporated in 1619 and was eventually



nationalised by the Metropolitan Water Board in 1902, when at the time, it served 1.25million people. The modern Thames Water was formed by a merger in public ownership in 1974, and floated in 1989. TW has a reputation for carrying out major water construction projects at home (notably the London Ring Main) and abroad ahead of time and budget. Likewise, all of its current international concession projects are performing ahead of budget, with time and service standards performing in a similar manner. The company successfully renegotiated the Jakarta water provision contract, which at one point appeared to be under threat in the post Suharto changes. At Izmit in Turkey, TW’s dam and bulk water provision infrastructure were unaffected by the earthquake in August 1999. There has been a tendency for the company to be seen as reactive over issues such as water resources and mobilising rising groundwater levels in central London. High distribution losses stemming from the age of some of its distribution infrastructure have not helped in this process, and this continues to be an area of concern. Thames Water Ltd., regulated activities in England

Y/E 31/03 (£million) 2000 2001 2002 2003 Appointed business 1,102.7 1,002.2 1,054.6 1,073.7 Non-appointed business 25.8 26.9 31.7 36.6 Total turnover 1,128.5 1,029.1 1,086.3 1,110.3 Operating profit 485.6 376.0 358.0 279.6 Pre-tax profit 364.6 259.0 251.4 200.9

Scotland

1998/99 Eastern Scotland 30 year PFI BOT 585,000 sewage treatment Sterling Water (TW (49%), M J Gleeson (41%) and Montgomery Watson (10%) gained the Eastern Scotland contract. The original Almond Valley and Seafield £50 million scheme for the upgrading of five sewage treatment works serving Edinburgh and replacing sewage sludge disposal to sea with land based recycling has been extended to include the £20 million Esk Valley scheme. These contracts are operated by Thames Water Services. The population covered will be 585,000 at the start, rising to 850,000 in an area covering 1million people at the outset and 1.2million at completion. Wales

2001 Wales Customer Services 1.3million households TW holds the £68 million contract to manage customer services for Dwr Cymru Welsh Water until 2005. The contract serves 1.3million connected properties, representing a population of over 3million. Turkey

1995 Izmit 15 year BOT 1.2million bulk water The £571 million Turkish bulk water construction, management and pumping contract for Izmit and Istanbul has been a challenging one, because of political and economic perturbations. Construction was completed in November 1998, ahead of schedule and budget, with a 15 year operational concession running to 2014, providing 142million m³ pa of water, including 20million m³ pa for Istanbul. Thames Water International (TWI) has a 35% holding in Izmit Su As, the operational company, with the rest being held by Turkey’s Guris Insaat (12%) and Gama Endustri (23%) as well as Mitsui (7.5%), Sumitomo (7.5%) and the Izmit Municipality itself (15%). 15% of the finance is through equity and 85% from debt. The project serves 400,000 in Izmit, with the rest in surrounding areas. The operational contract is generating US$6 million per month in revenues. The facility was unaffected by the August 1999 earthquake that hit the area. TWI’s stake in Izmit Su As was increased to 47% through the purchase of a 11.9% stake in August 1999 for £13.1 million, including £1.1 million in goodwill. The project continues to meet 100% of the contractual water quality targets since commercial operation. United Arab Emirates (UAE)

2002 Ajman 27.5 year BOT 200,000 wastewater treatment Thames gained the concession with Black & Veatch, who have been developing the concept since the mid 1990s. UAE has a population of 200,000, 60% of whom are to be connected to a sewerage network by 2006. Construction of a wastewater treatment plant will take 2.5 years and it will have a capacity of 70,000m 3 per day. Initially, US$140 million in capital spending will be called for, most during the first four years of the concession. The network will be designed to handle a maximum population of 352,000 people, the designed capacity of the treatment plant will be for 300,000 people. UAE will become TW’s regional centre.



United Water: Australia and New Zealand United Water (UW) is a venture between Thames (47.5%), VE (47.5%) and Australia’s Kinhill Engineers (5%). It was set up as part of the Adelaide contract, in order to secure business for the state of South Australia in other parts of Australasia. A change of party at the state government is challenging the contract, even though it has exceeded all obligations to date. Australia

2000 Maffra 10 year BOT Water treatment The US$10.6 million contract is for an industrial water treatment facility in the state of Victoria.

1999 Ballarat 25 year BOOT 110,000 water supply The TW consortium with Babcock & Brown, Clough Engineering and Black and Veatch, is the preferred bidder for the water provision contract to the Central Highlands Regional Water Authority in Victoria. The water treatment plant was completed in 2000 and the contract will generate £111.5 million in turnover. UW is responsible for the O&M element. An additional 20 year contract were gained in 2003 serving 5,000 people in the neighbouring towns of Beaufort, Blackwood, Clunes and Forest Hill.

1995 Adelaide 15 year BOT 1.2 million water & sewerage This was the first contract gain by the TWI/VE UW alliance. The project involves A$650 million of construction work and the concession will be worth A$1.5 billion over its life. The contract involves the construction and operation of six water treatment plants and four sewage treatment plants and allied distribution infrastructure. The first phase entered service in 1996. New Zealand

1997 Papakura 30 year BOT 40,000 sewerage Papakura is an urban district of Auckland. The A$2 million contract was awarded to UW in 1997.

2002 Ruapehu 10 year O&M 40,000 sewerage In November 2002, UW started a 10 year O&M contract with the Ruapehu District Council, a rural region of approximately 15,000 residents located 320km south of Auckland. The contract covers rural water and wastewater treatment facilities, 117km of water pipes, 97km of wastewater pipes, 3,670 wastewater connections, 4,570 water connections and 38km of stormwater pipes.

2004 Thames -Coromandel 10 year O&M 25,000 water & sewerage Thames -Coromandel district is in the North Island. It has a residential population of 25,000 rising to 150,000 during the summer. There are 14,650 water and 18,100 wastewater connections. China In 1995, Thames gained a 20 year BOT for a water treatment plant at Da Chang, Shanghai generating 0.4million m3 of potable water per day. The facility provides water for at least 1.3million people, having entered service at the end of 1997. Thames sold the company back to the Shanghai municipality ion 2004 after the enforcement of a law passed in 2002 forbidding fixed rates of returns for foreign ventures. The China Water Company Thames Water Aqua International GmbH acquired 48.8% of CWC for US$20 million, plus a US$50 million capital injection. Part of the stake is accounted for by Hyder’s 20% stake when the fund was set up in 1996. The medium term aim is to combine CWC with TW's activities in Shanghai. The rest of CWC is held by Sime Darby (Malaysia) and the Kadoorie family (HK, 46%), along with Hong Kong Land (HK, 2%) and Hong Lim Investments (HK, 3%). The latter two companies sold 46% of CWC to Sime Darby and Kadoorie for US$70 million in July 2003. Together, these operations serve 4.4million people. US$100 million will be invested in the six plants in the medium term. A US$4 million holding in a project in Taixing made in 2000 was sold back to the municipality for US$5 million in 2002.



City (Province) Project Construction Capex Shaoxing (Zhejiang) 400,000 m3/day water treatment 1998-2001 US$32 million Shanyang (Guangzhou) Water infrastructure for 740,000 people 1996-1998 NA Xinmin Water infrastructure, 100,000 m3/day WTW 2000-2001 NA Changchun (Jilin) 390,000 m3 day WWTW for 2,500,000 people 2000-2001 NA Yanjiao (Hebei) Water infrastructure, 50,000 m 3/day WTWs 2000-2003 NA Qitaihe Water infrastructure, 100,000 m3/day WTW 2001-2003 NA

Indonesia

1997 East Jakarta 25 year BOT 3.5million water The project is being funded 30% by equity and 70% by debt. Revenues for Thames Parn Jaya are being driven upwards as more customers are connected. More than 3million people are currently served, up from 2.5million in 1998. 20,580 new connections were made during 2002, equivalent to 200,000 people. The East Zone’s population is forecast to rise from 4.6million to 5.8million by 2020. It is understood that the weakness of the Rupia has caused the project to lose £1 million per month since 2001. Malaysia

1999 Johor 30 year O&M 2.6million water In June 1999, TWI signed a 30 year contract with SAJ Holdings Snd Bhd for the management of the state of Johor’s water supply network, including 26 water treatment plants. Johor has a well developed water provision infrastructure with 96% of the state’s population already connected to piped water, but water demand is rising because of industrial development.

1993 Sabah O&M 0.16million water TW has been providing operations and maintenance services to 5 water treatment plants in the state of Sabah, providing services to a population of 160,000. Puerto Rico

1996 San Juan 5 + 15 years DBO 1.6million water A 5 year DBO (3 years construction and 2 years operation) 50:50 JV with Dick Corporation of Pittsburgh for water services to 1.6 million people in San Juan. The US$300 million contract has been extended for a further 15 years as a full concession contract. There have been some delays, but no material impact to TWI and the facility entered service in September 2000. The 0.4million m3 per day, 5 year O&M contract runs through September 2005. Thailand

1995 Northern Bangkok 25 year BOOT 800,000 water The contract was awarded to Pathum Thani Water (30% held by TW). The contract in Pathum Thani (a northern area of Bangkok) has performed to expectations, with the US$152 million, 0.288million m3 per day water treatment plant entering service in October 1998. The provincial water authority will be responsible for collecting customer payments. The contract can be extended by up to 20 years. In June 1999, TWI gained an additional US$25 million five year water management contract in the region, in order to reduce distribution losses from their current level of 50%. In March 2000 the Metropolitan Water Authority of Bangkok awarded TW a US$40 million four year contract to reduce distribution losses in Bangkok from 50% to 30% by 2004. 2001 West Bangkok 30 year BOT 400,000 water The US$240 million contract between TW and CH Karnchang of Thailand and the Provincial Water Authority (PWA) is to develop a 320 million litre per day distribution system and will serve 400,000 people and industrial customers in Bangkok’s Nakorn Pathom and Samut Sakhon districts. Chile TW has acquired three of the water companies to have been privatised and is currently bidding for at least one of the final set of entities to be sold. TW now has more than 1,000 employees in Chile, and a total turnover of US$90 million. It is currently concentrating on developing sewage treatment plants in each of the regions.



Thames Water sewage treatment coverage in Chile (% population)

Sewage treatment coverage 2001 2002 2003 2007 ESSEL 30% 80% 80% 100% ESSBIO 6% 24% 80% 100% ANSM 36% 43% 80% 100%

2000 ESSEL Asset ownership 600,000 water & sewerage

Inversiones Andes Sur, the TWI/EDP JV acquired Empresa de Servicios Sanitarios de El Libertador (ESSEL) of Chile for US$136 million. The company serves 600,000 people in the city of Rancagua in Chile’s 6th Region. ESSEL had a 2001 turnover of US$19 million. TW acquired 25.5% of ESSEL for US$67.6 million in March 2000, and bought out EDP's share of the company for US$70.5 million in December 2001.

2000 ESSBIO Asset ownership 1,500,000 water & sewerage TW’s Aguas de Arauco acquired a 50.9% stake in Empresa de Servicios Sanitarios del Bio-Bio S.A. (ESSBIO) for US$336 million in October 2000. Originally, TW acquired a 42% stake for US$282 in September 2000. Located in Concepción, 350 miles south of the capital, Santiago, ESSBIO serves 1.5million people in Chile's 8th region, and had a 2001 turnover of US$46.9 million. Capital investment of approximately US$180 million between 2002 and 2006 is planned, primarily targeted at wastewater treatment in Concepcion (entered service in 2003, serving 500,000 people) and Los Angeles (140,000 people) and enhanced customer service across the region, including extending sewerage connections from 10% to 70%.

2001 ANSM 30 year concession 600,000 water & sewerage The concession contract was purchased for US$171 million in November 2001. Aguas Nuevo Sur, Maule (ANSM) is located in the 7th region, serving a population of over 560,000 and in 2000 generated revenues of US$21.4 million. ESSAM is positioned between ESSEL in Rancagua and ESSBIO in Concepcion. Thames will invest approximately US$100 million over the first five years of the contract and a significant part of the capex will be for wastewater treatment plants. USA – American Water American Water Works has been seeking to create a national presence in the USA water market through a long-term acquisition programme that started in earnest during 1996. Despite its aggressive acquisition programme, AWW seeks to concentrate on developing regional strength in water utility operation rather than merely further the numbers served. Thus in August 2001 it sold certain activities in New England to Kelda Group as Kelda’s Aquarion had a stronger presence in this region. In September 2001, American Water Works agreed to a US$4.6 billion bid by RWE. A US$3.5 billion bid was rejected by AWW in August 2001. AWW will be merged with Thames Water. The transaction was subject to the approval of utility regulatory commissions, which was completed in January 2003. Thames’ US activities (Elizabethtown) were subsequently integrated into American Water. TW entered the USA market in November 1999 through an agreed US$948 million bid for E’town. The company dates back to 1854, with the present corporation being formed in 1961 through the consolidation of Elizabethtown Water Company and Plainfield-Union Water Company, along with the Mount Holly Water Company in 1985. Edison (EWC) and Liberty (LWC) serve the township of Edison (40 year operating contract, total concession fees of US$15.3 million) and the city of Elizabeth (20 year operating contract) in New Jersey. They were acquired in 1997 and 1998 respectively. EWC serves 11,500 customers and LWC, 17,600. The two companies were merged as American Water in 2003. Since 2003, the absence of SEC filings has meant that there is minimal information available about their progress. Major acquisitions, 1996-2002

Year Company People served

Cost (US$ million)

Turnover US$ million

1996 PAWC 2,000,000 409 N/A 1998 EHCS 35,000 17 N/A 1999 NEI 1,700,000 700 N/A 1999 American Anglian (50%) 1,000,000 32 31 million (1999) 2000 UWR subsidiaries 122,500 50 N/A 2001 City of Coatesville 53,000 48 7 million (2001) 2001 Azurix North America 2,000,000 160 134 million (2001) 2002 Citizens Utilities subsidiaries 1,100,000 859 140 million (2001)



Currently AWW serves approximately 16.3million people, 10.3million via regulated utility operations and 6.0million via O&M contracts including those acquired from Azurix in August 2001. This also includes the Citizens acquisition, which was completed in February 2002. AWW’s regulated activities in the USA, 2000-03

State People served Pennsylvania 2,000,000 New Jersey 1,650,000 Missouri 1,300,000 Indiana 750,000 Illinois 650,000 California 500,000 West Virginia 490,000 Kentucky 300,000 New York 248,000 Arizona 230,000 Tennessee 180,000 Iowa 165,000 Virginia 160,000 Ohio 120,000 Connecticut 75,000 Massachusetts 55,000 New Mexico 45,000 Hawaii 27,000 New Hampshire 24,000 Maryland 12,000 Michigan 10,000 Total 8,991,000

AWW, tuck-in acquisitions, 1998-2003

Year Transactions completed

Customers served

Customers per deal

Total cost (US$million)

US$per customer

1998 15 26,770 1,785 47 1,756 1999 21 14,000 666 12 857 2000 12 38,000 3,167 52 1,368 2001 8 20,000 2,500 55.9 2,795 2002 8 29,000 3,625 31.9 1,100 2003 & pending 26 14,500 N/A N/A N/A

Provisional offers for 23 further tuck-in acquisitions serving 65,500 customers (200,000 people) are also pending. AWW has 25 utility subsidiaries that provide water and/or wastewater services to more than 9million people in 1,300 communities in 22 states. Investment in new facilities in 1998 totalled US$467 million, falling to US$377 million in 2000, rising to US$410 million during 2001. AWW anticipates that approximately US$2.0 billion will be invested in new facilities between 2001 and the end of the year 2005. Non-regulated activities: American Water Services American Water Services is responsible for the company’s non-regulated activities. It serves some 6million people and in 2002 generated revenues of US$222 million through 800 contracts operating 700 water treatment works and 300 wastewater treatment plants. Anglian Water Group (AWG) of the UK formed American Anglian Environmental Technologies (AAET) in 1993, a 50:50 JV with American Water Works to pursue opportunities for water and sewerage projects. AWG sold its stake in the JV to AWW in October 1999 for US$32 million. AAET serves 1.0million people through managing 175 water and wastewater treatment facilities in seven states, with a 1999 turnover of US$31 million. In August 2001, AWW acquired all of the North American activities of Azurix from Enron for US$153.3 million plus US$6.5 million in debt. Azurix has built a broad portfolio of activities in the USA and Canada, including a small utility, and municipal and industrial outsourcing services, water rights and a web based water trading system. Azurix acquired Philip Utilities Management Corporation for US$106 million in May 1999. Azurix North



America (ANA) had a turnover of US$131.5 million in 2001, serving approximately 2million people, including 1.82million for water provision and 0.35million for sewerage and wastewater treatment services (estimated). Azurix contract gains in the USA (US$ million)

Date Contract Location Value Duration (Years)

Annual revenues

05-2000 O&M water provision Jefferson, Louisiana 30 15 2.0 05-2000 O&M water provision Brunswick, New Jersey 120 20 6.0 05-2000 O&M water provision Wildwood, New Jersey 71 20 3.6 11-1999 O&M water & wastewater Gary, Indiana 10 5 2.0

One other major contract gain has been the 1996 US$410 million contract for Pennsylvania Enterprises’ water systems near Scranton, Pennsylvania. AAET also manages the operation of 2 New Jersey systems and 15 in Indiana, most of which are for small communities. Canada In September 2001 Azurix NA was awarded a 10 year contract to operate and maintain the Lake Huron and Elgin Area Primary Water Supply Systems in Ontario. ANA’s bid was priced at CAN$71.2 million (US$47.5 million) over the length of the contract, a saving of approximately CAN$1 million pa. The contract has an option for an additional five years and serves a population of approximately 420,000. Contact Details Name: American Water Address: 1025 Laurel Oak Road, Voorhees,

NJ 08043 Tel: (609) 346-8200 Fax: (609) 346-8360 Web: www.amwater.com Contact Details Name: RWE AG Address: Opernplatz 1, D-45128 Essen,

Germany Tel: +49 201 12 00 Web: www.rwe.com Dr. Harry Roels (Chairman and CEO) Dr. Klaus Sturany (Vice President, financial control) Contact Details Name: Thames Water Plc Address: 14 Cavendish Place, London

W1M 0NU, UK

Tel: +44 20 7636 8686 Fax: +44 20 7436 6755 Web: www.thames -water.com Bill Alexander (Chairman) Christopher Bunker (Finance Director)

GREECE PART 3: COMPANY ANALYSIS


GREECE ATHENS WATER SUPPLY AND SEWERAGE COMPANY SA The Athens Water Supply and Sewerage Company SA (EYDAP) dates back to the Greek water Company (EEY) formed in 1926. EYDAP was partly floated in January 2000. 28.2% of the company's equity was sold at that time, with 1.4% being acquired by EYDAP’s staff and the Greek Government retaining 65.0% of the company's shares and the Agricultural Bank of Greece a further 10.7%. The Government and the Agricultural Bank were planning to sell a further 10.3% and 10.0% of EYDAP respectively by the end of 2003, but market conditions caused the issue to be postponed. EYDAP provides water to 4,000,000 people in Athens and its suburbs and sewerage for 3,300,000. EYDAP, profit & loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Turnover 229.2 256.8 287.7 285.0 329.9 Operating profits 51.8 90.7 102.8 44.0 54.8 Net profit 39.4 67.7 68.9 48.1 61.6 Earnings per share (€) N/A 0.635 0.647 0.452 0.579

Capital spending rose from €67 million to €73 million in 2003. EYDAP has a 20 year concession with the Government for the provision of water and sewerage services. The state retains responsibility for bulk water provision to the company and for its storm sewerage services. EYDAP will carry out a €1,245 million investment plan between 2000 and 2008, concentrating on expanding of its sewerage system and preparing Athens for the 2004 Olympic Games. In June 2003, a €405 million investment programme for Attica was announced. This compares with €166 million being spent between 1994 and 1998. Revenues from the flotation, along with a subsidy from the Government via EU structural funding are being used to finance part of the capital spending. In the final quarter of 2003, EYDAP acquired water systems serving two neighbouring municipalities. In each case EYDAP is to develop a sewerage network for the municipality.

2003 Aspropyrgos €2.75 million 31,000, water 2003 Elephsina €1.80 million 23,000, water

In February 2003, EYDAP started delivering gas and power supply and telecommunications services in a venture with Aktor and Hellenic Technodomiki. In July 2002, the company entered into a partnership with Veolia Water to discuss joint approaches for gaining water and wastewater contracts in the Mediterranean and Balkan regions. Contact Details Name: EYDAP Address:

156 Oropu Street, Galatsi Athens, 111 46, Greece.

Tel: +30-10-214-4444 Fax: +30-10-214-4259 Web: www.eydap.gr Eleftherios Tzellas (Chairman) Christos Aggelopolous (MD) Maria Ganou (FD)

GREECE PART 3: COMPANY ANALYSIS


THESSALONIKI WATER & SEWERAGE The Thessaloniki Water Supply and Sewerage Co. (EYATH) serves 850,000 in the city of Thessaloniki, along with selling bulk water to surrounding municipalities. The company dates back to the Ottoman Water Company of Thessaloniki, which was formed in 1888. EYATH (EYAT) was formed in 1998 through the merger of the city’s Water Supply Company (OYT, established in 1939) and the Sewerage Company (OAT, established in 1970). EYATH is situated in Central Macedonia, a part of Greece that has suffered from poor water levels. During the summer, average daily consumption is 280,000m 3, compared with an availability of 220,000m 3 and as a result, since 2002 a banded tariff structure has been introduced that allows for improved returns for the company, while rewarding households that use less water. EYATH, profit & loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Water revenues NA 22.5 33.2 42.6 NA Sewerage revenues NA 7.4 11.5 14.9 NA Turnover 29.5 29.8 44.7 57.5 51.1 Operating profit 3.8 0.8 20.4 N/A 11.5 Net profit 4.1 -0.3 6.5 19.7 7.2 Earnings per share (€) N/A N/A 0.392 0.989 0.394

26% of the company’s shares were sold to investors in September 2001. The €17 million raised from the listing will be used to partly finance upgrading and modernisation of the water and sewerage network. EYATH remains under state control, with 60% of its capital spending funding coming from the EU’s Cohesion Fund, 30% from the state and 10% being internally funded. €177.7 million has been allocated for capital spending in the area for 2002-06, including €100 million for extending and upgrading the sewerage network and €75 million on water distribution. €80 million of this is being directly financed by EYDAP. Contact Details Name: Thessaloniki Water Supply and Sewerage Co. (EYATH) Address: 127 Melenikou & Engatias,

54365 Thessaloniki, Greece

Tel: +30 23 10 209 231 Fax: +30 23 10 250 642 Web: www.eyath.gr Professor Christos Tsongas (Chairman and MD) Spyridon Skivounas (Deputy Chairman) Vassileios Paparassileiou (FD)

INDIA PART 3: COMPANY ANALYSIS


INDIA BHEL BHEL (Bharat Heavy Electricals Limited) is the largest related energy and infrastructure sector engineering and manufacturing enterprise in India. Activities include manufacturing water testing systems and desalination plants. BHEL’s Industrial Systems Group (ISG) has been seeking to develop private sector operations in water and wastewater treatment projects, which has been identified by the company as one of the principal areas for growth between 2002 and 2007. As part of this, the company has developed its ability to provide stystems and services for water management systems including potable water pumping stations, desalination plants, water treatment plants and sewage and effluent treatment plants. In 2003, BHEL commissioned three potable water pumping stations in the vicinity of Bangalore, providing 0.27million m3 of water per day. The fully automated project has been set up by ISG for the Bangalore Water Supply and Sewerage Board, under the Cauvery Water Supply Scheme Stage IV. This project has entered a three year O&M period. In September 2003, BHEL gained a wastewater treatment construction and operations contract in Chennai. The Rs364 million (US$7.9 million) contract was awarded by the Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB). The order envisages design, engineering, supply, installation and commissioning of mechanical and electrical equipment, besides automation and complete civil works of a 40,000m 3 per day sewage treatment plant at Nalsapakkam, Chennai. Construction will take 18 months, with the facility entering service by early 2005. BHEL will also look after Operation and Maintenance (O&M) of the plant for ten years, post commissioning. The sewage treatment plant will have its own power plant which will be run by biogas, generated within the facility, making it self-sufficient and lowering operating costs. BHEL, profit and loss account Y/E 31/03 (R million) 2000 2001 2002 2003 2004 Revenues 70,807 71,039 77,433 79,546 87,715 Operating profits 8,871 3,379 7,598 8,572 12,446 Pre-tax profit 8,654 2,941 6,628 8,024 10,148 Net profit 5,994 3,126 4,679 4,445 6,582 EPS (R) 24.5 12.8 19.1 18.2 26.9 Contact Details Name: BHEL Address: BHEL House, Siri Fort,

New Delhi - 110049, India.

Tel: +91 11 26001010 Fax: +91 11 26493021 Web: www.bhel.com HW Bhatnagar (Chairman) CI Srinivasan (Finance Director)) Ramji Rai (Director) AK Puri (Power)

INDIA PART 3: COMPANY ANALYSIS


INDIA IVRCL Constructions and Projects Ltd

IVRCL Constructions & Projects LTD (IVRCL) has developed a policy of moving its construction activities from civil engineering to lump sum turnkey projects, to design and execution projects and in three cases BO/BOT concessions: The Alandur WWTW; the Tirupur MSW facility and the athletes’ village for the December 2002 National Games in Hyderabad. IVRCL Constructions & Projects LTD, profit and loss account

FY 31/03 (Rs million) 2000 2001 2002 2003 2004 Net sales 1,962 2,631 3,922 4,403 7,735 Operating profit NA NA 299 362 559 Interest NA NA 100 122 121 Profit before tax 139 157 199 240 340 Extraordinary items 0 -3 -45 -46 88 Tax paid 48 26 23 39 35 Net profit 91 128 131 155 392

The company’s regional structure was changed into a divisional structure in 2001. Currently water systems and pipelines account for 60% of sales as against 30% in 1998. IVRCL has an order backlog of approximately Rs17 billion, mainly in water projects. These include water supply to Mahaboobnaar, Andhra Pradesh. (Rs536 million, 2003), the Narmada Canal Distribution Network for Rajkot District Water Supply Scheme (Rs710 million, 2004), three Asian Development Bank funded water transmission projects in Jamnagar, Rajkot and Dwarka (Rs 788 million, 2004), and a water pipeline in Gujarat (Rs870 million, 2003). The company is involved in two BO projects including the first BO for wastewater in India: • IVR Enviro Projects Private Ltd (89.9%): BO contract for the Tirupur MSW treatment plant. This was

constructed in 2001-02 for R3046 million and entered service in 2003. This project is running at a loss due to lower than contracted separated wastes being delivered to the facility.

• First STP Private Ltd (95%): JV with VA Tech Wabag Ltd (Balcke Duo & Wabag Technologies Ltd), a

subsidiary of Austria's VA Tech AG. Developing a 12Ml/day (4.4million m3 pa) WWTW at Perungudi for Alandur Municipality, where IVRCL has installed the underground sewerage system. The WWTW has been completed and the households need to be connected to the system by the municipality.

Contact Details Name: IVRCL Constructions & Projects LTD Address: M-22/3RT, Vijayanagar Colony ,

Hyderabad, Andhra Pradesh 500 057 India

Tel: 040 334 3678 Fax: 040 334 5004 www.ivrcl.com E. Sudhir Reddy (Vice Chairman and MD) R. Balarami Reddy (Finance Director) Sri Arvind Pande (Chairman)

ITALY PART 3: COMPANY ANALYSIS


ITALY ACEA (AZIENDA COMNUALE ENERGIA e AMBIENTE SPA) Azienda Comunale Energia e Ambiente (ACEA), the municipality serving electricity and water services to the city of Rome, was partially floated in February 1999. 51% of the equity is held by the municipality of Rome, 1.9% by Suez and the rest by a variety of private and institutional investors. A further share sale by the municipality may be considered. The company was founded in 1909 for electricity distribution, started water provision services as AGEA in 1937 and was renamed ACEA in 1945. ACEA is Italy’s largest water and electricity utility. The company believes that it provides the best quality drinking water in Italy at one of the lowest prices for a major city in Europe. In 1999, 2.8million people were served with water services and 2.2million with sewerage services. This has risen to 3.6million people through ACEA ATO 2, a 30 year concession between ACEA (96%) and 111 councils (4%) in the ATO2 Lazio region that started in January 2003. Water turnover for ATO2 was €268 million in 2001 against €259 million in 2000. In addition, contracts for water and wastewater services for 200,000 people in the municipalities of Guidonia-Montecelio, Tivoli, Monterotondo, Grottaferrata and Ciampino were added to the regional activities in 2003. ACEA expects to increase its coverage in the region by 300,000 per annum through acquiring neighbouring municipalities. ACEA, profit and loss account

Y/E 31/12 (€billion) 2000 2001 2002 2003 Turnover 715.0 1,145.7 1,288.2 1,481.1 Operating profit 88.5 106.1 136.6 147.8 Net profit 48.8 47.6 -108.0 49.0 Earnings per share (€) 0.229 0.224 -0.509 0.230

Water revenues in 2003 were €372.9 million with operating profits of €91.1 million. ACEA provides water and wastewater services to 12million people in Italy, a 12% market share. In August 1999, ACEA entered into a preliminary agreement with Sicily’s largest water companies to modernise their water networks. The agreement with Ente Acquedotti Siciliana SpA and AMAP is being developed to increase ACEA’s exposure to the Southern Italian market in the medium term. The company will start by seeking to reduce water distribution losses and upgrade the island’s water management systems. ACEA hopes to develop this into a concession in the longer term. In November 1999, ACEA set up Aqua Italia SpA (AI), a 67:33 venture with Impreligio SpA (with Rimorchiatori Riuniti SpA holding the remaining 10%). In 2000, AI acquired majority stakes in Acquedotto de Ferrari Galliera (ADF, 67%) and Acquedotto Nicolay (AN, 53%), two of the three listed water companies in Italy prior to the emergence of the municipal multi-utilities. Both companies serve the city of Genoa (see their respective company entries). ACEA has also acquired 3.7% of Amga's (see relevant company entry) equity. All three companies provide water services to the city of Genoa. ACEA seeks to create a formal alliance between Amga and itself for water services to the city, through the integrating of the ADF and ADN.

2003 Frosinone ATO privatisation 800,000 water & wastewater In April 2002, a consortium led by ACEA gained a 29 year concession for the Frosinone ATO 5. ACEA holds 65% of the consortium, with Bouygues’ CREA being one of the secondary investors. The concession covers 480,000 people (182,000 customers). €361.5 million will need to be invested during the concession’s life. The concession entered into service in October 2003 and covers 86 municipalities. Three ATOs were gained in Tuscany by a consortium lead by ACEA and also featuring Ondeo. With ACEA and Ondeo controlling services for 2.7million out of the 3.5million people living in Tuscany, a rationalisation of these concessions is planned.

2003 Pisa ATO privatisation 700,000 water & wastewater A 45% stake in Acque SpA (AI) was acquired for €19.2 million. AI is Tuscany’s ATO-2 Basso Valdarno, serving 57 communes. The concession will generate €1.2 billion in revenues.

2003 Siena/Grosetto ATO privatisation 373,000 water & wastewater A 40% equity stake in the Acquedotto de Fiora was acquired by the ACEA led consortium for €19.3 million, with a concession life of 25 years. ATO-6 Ombrone covers 56 communes and required some €433 million in capital spending.

2003 Florence ATO privatisation 1,200,000 water & wastewater The ACEA led consortium has acquired 40% of Publiacqua SpA, the holder of the 20 year concession to operate water and wastewater services for 50 communes in Tuscany’s ATO-3 Medio Valdarno. Publiacqua had a turnover of €104 million in 2002 and net profi ts of €8 million. The consortium is contributing €60 million towards the €150



capital increase, with the municipalities paying the remaining €90 million. In conjunction with the privatisation, €300 million of Publiacqua’s revenues were securitised in order to pay for the capital increase and to retire mature debt. ACEA is currently in talks to acquire 40% of ASA SpA, Tuscany’s ATO-5 Toscana Costa-Livorno. ASA provides water to 359,000 in the Livorno municipality. International activities In July 2004, ACEA announced that while it would retain its existing water activities, it would not be seeking new international contracts. Albania 2001 Tirana Acque 4 year management 650,000 water Amga and ACEA both hold 32% of Tirana Acque, an Italian consortium developed to take advantage of bilateral agreements between Italy and Albania. The contract is worth €10.5 million. The longer-term aim is to be involved in the privatisation of Greater Tirana Water Supply and Sewerage. Armenia

1999 Yerevan O&M 900,000 water management This is the first major international water contract to be gained by an Italian company. ACEA bid for the contract in partnership (55%) with Lotti & Associati (25%) and WRc (20%), two Italian engineering companies. ACEA beat VE, Suez and BWB in gaining the four year US$4.5 million pa contract, which was awarded in December 1999. Honduras

2000 San Pedro 30 year concession 495,000 water & sewerage The concession was awarded to Aguas de San Pedro in August 2000 and entered service in February 2001, with ACEA holding 31% of the consortium’s equity. Service targets are for 100% water coverage in three years and 100% sewerage coverage within five. US$135 million of investment is planned during the life of the concession. Peru

2000 Cono Norte 27 year concession 800,000 water ACEA (45%) teamed with Impregilo SpA (40%), Fisia Utalimianti SpA (5%) and Castalia & Cosapi SA (10%) of Peru for the Cono Norte concession that was awarded to Agua Azul SA in January 2000. After two years cons tructing a new water treatment works for US$50 million, the operating contract runs for 25 years. Cono Norte is part of the city of Rio Chillon. Its population is currently 750,000 but is expected to rise to 2,000,000 by the end of the concession. The concession involves the supply of 44million m3 of water pa at S2.8 million (US$0.8 million) per month and involves US$80 million in capital spending. Colombia Operations are carried out through ACEA’s 51% held Aguazul Bogota.

2003 Bogota 5 year O&M 2,500,000 water The contract is with the municipality’s Empresa de Acueducto y Alcantarillado de Bogotà (EAAB) and covers 45% of the city’s population, based in zones 2 and 5. The contract has an annual turnover of US$10 million.

2003 Santo Dominigo 4 year O&M 1,400,000 water The contract is with the municipality’s CAASD. It will run for a minimum of four years and is renewable.

Contact Details Name: ACEA SpA Address: Piazzale Ostiense 2, 00154 Rome, Italy. Tel: +390 6 57 991 Fax: +390 6 57 994 146 Web: www.aceaspa.it

Fabiano Fabiani (Chairman) AndreaMangoni (CEO) Isidoro Lucciola (CFO)



ACEGAS-APS Acegas is the city of Trieste’s municipal services company, providing electricity, gas and water services. The Commune of Trieste reduced its holding from 99.99% to 54.92% after its IPO in February 2001. 110,000 people are served with water by Acegas. The company seeks to compete for water and wastewater concessions in other ATOs as the market liberalises. Acegas, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Electricity 49.23 49.29 148.91 111.80 136.15 Methane 40.92 44.76 55.43 62.16 179.37 Waste management 14.96 28.81 36.37 32.08 83.97 Water 17.76 18.79 20.19 23.24 58.44 Funeral services N/A 3.36 6.49 6.68 NA Others 14.57 2.30 3.06 3.60 53.07 Total turnover 120.6 144.4 266.0 239.6 289.2 Operating profit 13.5 13.8 23.9 13.5 23.7 Net profit 8.8 9.4 11.1 7.1 10.6 Earnings per share (€) N/A N/A 0.313 0.200 0.299

Capital expenditure was €13.7 million in 2003. In 2003, Acegas merged with APS the ATO Bacchiglione serving the provinces of Padova and Vicenza. The combined entity serves 1million people in 144 municipalities and communes. The enlatrged company provided 64million m3 of water to 222,000 customers or approximately 575,000 people. Pro-forma turnover for the enlarged group in 2003 was €495 million. Contact Details Name: Acegas Address:

Via Maestri del Lavaro 8, 34123 Trieste, Italy

Tel: +390 40 77931 Fax: +390-40-7793427 Web: www.acegas.ts.it Guido Cace (Chairman) Massimo Paniccia (CEO) Maria Humar Di Biase (VP, Finance)



ACSM COMO ACSM Como (ACSM), the water and energy utility serving Como which has a population of 250,000 people, was partially privatised in November 1999. To date, the company has concentrated on developing its core activities, which had a flat turnover in 1999, but are offering an improved performance in the current year. A second share sale in November 2000 reduced the municipality's holding to 50.6%. In April 2003, ASCM entered into merger talks with Bergamo’s municipally held BAS Bergamo Ambiente Servizi SpA. Bergamo is located near to Como and would add some €85 million to ASCM’s turnover. ACSM Como, profit and loss account

YE 31/12 (€million) 1999 2000 2001 2002 2003 Natural gas 21.8 28.0 32.2 35.6 57.1 Waste management 8.8 9.1 14.3 21.9 18.8 Water 5.5 5.7 6.6 8.5 7.1 Waste-to-energy 2.9 3.6 4.0 7.5 3.8 Group turnover 39.0 46.4 57.0 63.9 88.4 Operating profit 6.1 5.8 6.1 8.6 11.1 Net profit 5.5 2.5 2.0 3.2 3.8 Earnings Per Share (€) 0.149 0.68 0.052 0.087 0.103

ACSM sells water to 14,038 domestic customers, selling 12.2million m3 in 2003 at €0.44 per m3. The company has a total water treatment capacity of 16million m3 pa. ACSM’s ComoDepur is responsible for water treatment and sewage and sewage treatment is carried out by the Municipality of Como. ACSM is currently seeking to expand into these areas. Contact Details Name: Acsm Como Address: Via Pietro Stazzi,

222100 Como, Italy Tel: +(390) 31 529 223 Fax: +(390) 31 523 267 Web: www.acsm.it Giuseppe Villani (Chairman) Antonio Formenti (Commercial Director)



ACQUEDOTTO DE FERRARI GALLIERA SPA Acquedotto de Ferrari Galliera SpA (ADFG) has carried out water provision since 1880, serving water for 350,000 people, working in conjunction with Acquedotto Nicolay in Genoa. ADFG sold 40.12million m3 of water in 2002 and 34.81million m3 in 2003, when distribution was affected by the driest weather since 1884. Typically, 85-90% of water sold goes to domestic customers with the balance being taken by commercial and domestic customers. In 2000, ACEA through Aqua Italia made a bid for the company. After gaining 67.0% of ADFG’s shares, ADFG’s management accepted the bid. AMGA’s Genova Acque holds a further 27.62% of ADFG’s equity. A merger programme is currently under development for the integration of ADFG and Acquedotto Nicolay, although the companies continue to operate as separate market listed entities for the time being. Acquedotto Ferrari Galliera, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Turnover 18.67 20.2 21.2 23.1 23.6 Operating profit 4.2 5.7 6.3 8.7 9.6 Net income 4.0 6.6 4.9 4.9 5.6 Earnings per share (€) 0.106 0.177 0.131 0.127 0.147

Contact Details Name: Acquedotto Ferrari Galliera SpA Address: Piazza Della Vittoria 11/A,

16121 Genoa, Italy Tel: +39 10 587 441 Fax: +39 10 589 222 Web: www.adfg.it Giuseppe Anfossi (Chairman) Fluvio Vento (Vice Chairman) Biagio Erambo (MD)



ACQUEDOTTO NICOLAY SPA Acquedotto Nicolay SpA (AN) has been responsible for water distribution to parts of the city of Genoa since 1853, serving a total of 330,000 people. In 2000, ACEA through Aqua Italia made a bid for the company. After gaining 53.15% of Acquedotto Nicolay’s shares, the company’s management accepted the bid. These shares have subsequently been vested to Acquedotto de Ferrari Galliera. AMGA’s Genova Acque holds a further 33.71% of AN. A merger programme is currently under development for the integration of ADFG and Acquedotto Nicolay. Acquedotto Nicolay, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Turnover 10.0 9.7 9.7 9.7 9.4 Net income 1.3 1.5 1.3 1.4 1.6 Earnings per share (€) 0.100 0.112 0.096 0.108 0.121

Contact Details Name: Acquedotto Nicolay SpA Address: Piazza della Vittoria, 11/A,

16121 Genoa, Italy Tel: +(390) 10 587 441 Fax: +(390) 10 532 756 Web: www.nicolay.it Dr Giancarlo Piombino (Chairman & MD) Vincenzo Puca (Vice Chairman)



ACQUE POTABILI SPA Condotta di Acque Potabili is 14.4% held by VE, 67.1% held by Italgas (Eni) and 13.8% held by ACEA, having been founded in 1852 for water provision to parts of the city of Turin. The company is involved purely in water distribution in parts of Alessandria, Aosta, Asti, Cueno, Mantova, Savona, Turin, Verbania & Novara. There were 291,991 customers (950,000 people) in 2001, an increase of 128,197 over the 2000 figure, due to the transfer of contracts from Italgas. A further 190,000 people are served indirectly by the company. Water sales in volume terms have been steady in recent years at 68million m3 pa. Acque Potabili, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Water 39.30 39.42 40.31 58.71 48.57 Gas distribution 1.83 2.18 3.07 4.92 5.72 Group turnover 41.1 41.6 43.4 63.6 54.3 Operating profit 4.8 4.8 6.0 7.2 5.2 Net income 1.8 2.5 2.5 3.5 1.8 Earnings per share (€) 0.16 0.22 0.31 0.43 0.22

In March 2004, Eni announced that it would be selling its stake in Acque Potabili following the 2003 Italgas acquisition. In April 2004, VE, Amga, ACEA and Smat (Turin) all expressed an interest in the company. Contact Details Name: Acque Potabili SpA Address: Corso re Umberto 9 Bis,

10121 Torino, Italy. Tel: +39 11 55 941 Fax: +39 11 562 9730 Salvatore Pino (Chairman) Dr Giovanni Nilberto (Vice Chairman/MD)



AMGA SPA Azienda Mediterranea Gas e Acqua (Amga) is the city of Genoa’s gas and water utility. Amga is 54.1% held by the municipality of Genoa (30.7% directly and 23.4% through SPIm Spa) following the partial privatisation in October 1996. Amga provides 430,000 people with water and sewerage services in the city, and has gained contracts serving a further 1,486,000 people in other parts of Italy and a management contract in Moldova. Water and sewerage accounted for 15% of group turnover in 2003. Amga believes it can provide water services to a total of 2.5million people in Italy in the medium term. Amga has split off its local water division from the rest of its activities into Genova Acque, to ensure that it has the maximum flexibility to develop its activities outside Genoa once the municipality sees fit to sell off its majority holding. In 2003, Amga was granted a five year contract to manage the Genova ATO. This contract involves capital spending of €115 million (€35 million supplied by the municipality) designed to upgrade sewerage and sewage treatment and expand water distribution by 8million m3. VE has acquired 20% of Genova Acque in return for its 28% and 34% stakes in Acquedotto de Ferrari Galliera and Acquedotto Nicolay respectively. ACEA, which holds the rest of the equity of the two companies, subsequently acquired 3.9% of Amga and seeks to form a regional alliance serving Genoa and to spread its activities from Rome into the Lazio region. Amga acquired 35% of Atena SpA, the utility company serving Vercelli in January 2003. Atena serves a total of 100,000 people with water, sewerage, gas, power and waste management services and had a 2001 turnover of €52 million. Amga, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Natural gas 123.0 148.8 189.0 258.9 247.7 Water 44.3 47.2 56.4 55.3 58.1 Turnover 156.7 201.8 245.4 341.2 387.0 Operating profit 24.2 26.3 28.0 35.7 44.9 Net income 22.6 16.6 21.9 20.5 37.5 Earnings per Share 0.069 0.049 0.063 0.058 0.107

In 1999, Amga was part of the Suez led consortium that gained the 25 year water and sewerage concession for Arezzo and 36 surrounding communes. This was the first water concession awarded in Italy, reflecting the belated impact of the 1994 Galli Law. In March 2000, Amga was awarded three potable water supply contracts in Sardinia for 62,000 people; Sulcis Iglesinete (11,000), Campidano (25,000) and Trexenta-Marmilia-Mandrolisai (26,000), with a total turnover of Lira7 billion pa. In April 2000, Amga gained two contracts in Calabria with a Lira50 billion turnover, with Lira8.5 billion of investment in the first year and rising from then on. The contract signed with Ente Acquedotti Siciliana SpA and AMAP involves 90 water treatment plants in Reggio Calabria, serving 300,000 people and 150 water treatment plants in the province of Cosenza, serving 500,000 people. Amga holdings in Italy are as follows:

Company Region Amga’s Stake %

Million m3 pa

Population served

Water Sewerage

Date gained

Genova Acque Genova 80 40 495,000 780,000 2000 A Nicolay Genova * 34 11 200,000 0 2000 A de Ferrari G Genova * 28 40 110,000 0 2000 ATO Genova Genova 8 135,000 0 2003 IdroTigullio Chiavari 67 4 36,000 19,600 1998 AM.TER Cogoleto & Valle Stura 49 2 23,000 6,000 1996 AIGA Liguria 49 2 25,000 7,500 1996 Mondo Acque Mondovi, Piedmont 37 2.4 22,000 13,000 2000 Atena Piedmont 35 5 45,000 45,000 2003 ASTI Piedmont 45 7.5 75,000 0 2003 A.C.O.S. Novi Ligure, Piedmont 25 3.0 48,000 15,000 1996 AGAM ATO, Monza, Lombardy 70 14.4 121,000 120,000 2001 Nuove Acque ATO, Arezzo, Tuscany 35 17 296,000 105,000 1999 ASPEA ATO, Osimo, Marche 35 2.5 35,000 35,000 2001 ASMT ATO, Tortona 45 43,000 43,000 2004 ASA ATO, Livorno, Tuscany 40 350,000 350,000 2004

* Acquired via Genova Acque. ACEA has a controlling stake in both companies. In January 2004 Amga acquired 27% of IdroCons S.r.l., a company working mostly in the Valle Scrivia area in analysis and monitoring of drinking water, water treatment and waste management. The main partners in the company are Azienda Consortile Intercomunale Bacino dello Scrivia (43%) and Idroterra (22%).



Amga has a working relationship with a number of other ATOs where it aims to acquire strategic stakes. These include the ATOs serving Imperia, Savona, Cueno, (AMAT) and Macerata. Moldova and Croatia In August 1997, Amga gained a water management contract for Chisnau, the capital of Moldova, serving a total of 667,000 people. In August 2000, Amga reached an agreement with three Croatian towns in the district of Fiume for water, gas and telecommunications services. Albania 2001 Tirana 4 year management 650,000, water Amga and ACEA both hold 32% of Tirana Acque, an Italian consortium developed to take advantage of bilateral agreements between Italy and Albania. The longer-term aim is to be involved in the privatisation of the Greater Tirana Water Supply and Sewerage Enterprise. Contact Details Name: Amga SpA Address: Via de SS Giacomo E Filipo 7,

16122 Genoa, Italy. Tel: +39 101 55 8115 Fax: +39 010 55 86284 Web: www.amgaspa.it Professor Giovanni Domenichini (Chairman) Roberto Bazzano (MD)



ASM BRESCIA SPA Azienda dei Servizi Municipalizzati (ASM) Brescia was founded in 1908 by the city’s municipality, which sold 28% of its shares in July 2002. The remainder are held by the local commune and some related entities. A second share sale is currently under consideration. Water supply services have been offered since 1933 and wastewater and sewerage since 1995. In 2001, the company provided 51.3million m3 of water to 513,000 people in 49 communes, while treating 36.3million m3 of sewage effluent, the population equivalent of 434,000 people. In 2003, 58million m3 water was provided, 41million m3 of sewerage collected and 39million m3 of effluents treated with a total treatment capacity of 40million m 3. In 2003, ASM acquired the water and wastewater activities of Valgas and ASVT, adding approximately 50,000 people to the number served at the time of its partial privatisation. ASM Brescia, profit and loss account

Y/E 31/12 (€million) 2000 2001 2002 2003 Turnover - Water supply 34.9 36.9 43.5 52.2 Total turnover 573.0 650.3 785.2 854.2 Operating income 139.8 134.4 105.4 154.8 Net income 71.5 77.7 63.0 96.5 Earnings per share (€) N/A N/A 0.087 0.131

In March 2004, ASM announced that it was in talks with the Municipality of Bergamo to acquire Bergamo Ambiente Servizi (BAS), the municipality’s a multi-utility company. BAS is responsible for, amongst other activities the municipality’s water and sewerage services. Contact Details Name: ASM Brescia Spa

Address: Via Lamarmora 230, 25124 Brescia, Italy

Tel: +390-303-5531 Fax: +390-303-553204 Web: www.asm.brescia.it Renzo Capra (Chairman) Elio Tomasoni (General Manager) Luciano Aletto (Central Manager)



ENEL SPA Enel SpA remains under the control of the Italian Government, having had 31% of its shares listed in 1999. It is Europe's largest electricity company, controlling 87% of the Italian market, but like the others, it is increasingly affected by the introduction of competition. As a result, one of its areas of diversification has been into water provision in Italy, through the creation of Enel Hydro SpA. In May 2000, Enel sought to acquire Acquedotto Pugliese SpA (AP) from the Italian state. AP holds a water provision concession for the region of Pugila until 2018. This covers 850,000 customers or 5million people. Enel’s bid to acquire AP was blocked by the Italian Government in October 2001. This may in part be due to concerns that selling the municipally controlled water company to Enel, which remains 60.4% held by the Treasury, is contrary to the Government’s privatisation plans. Enel aims to sell its interest in Enel Hydro, with the aim of divesting ‘almost all’ of these activities by the end of 2004. Veolia Environnement is unders tood to be considering acquiring the concessions division. The company provides water to 6.1million people, mainly through Siciliacque, which provides water managements services in Sicily. Enel SpA, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Turnover 20,578 24,590 27,725 29,977 31,317 Operating profit 5,385 4,753 3,478 2,880 4,732 Net profit 2,345 2,189 4,226 2,008 2,509 Earnings per share (€) 0.19 0.18 0.70 0.33 0.41

2001 Calabria 30 year concession 752,000 water and wastewater Enel Hydro and Acquedotto Pugliese hold 49% of Societa Risorce Idriche Calabresi (So Ri Cal), serving the region of Calabria. The concession became operational in 2002 and involves Lira800 billion of capital spending over its life, mainly during the first 8-10 years. 2001 Latina 30 year concession 600,000 water and wastewater L'Ambito Territoriale Ottimale de Latina covers southern Lazio’s ATO-4, serving 38 communes. A consortium of Vivendi Environnement (40%), Enel (23%) and AP (23%) gained the concession in July 2001. Turnover will start at €50 million pa, rising to €65 million as new facilities come on stream. The concession will be worth €2 billion over its operating life, with investments of €370 million. UFW needs to be decreased from 70% to 25-30% and major sewage treatment upgrades are also required. A further 500,000 tourists use the area. Acquisition of Gruppo Camuzzi Camuzzi was founded in Milan in 1929. In October 2001, Mill Hill NV, the Dutch holding company of the Garilli family, sold 40% of its 100% holding in Gruppo Camuzzi to Enel for €434 million. In March 2002, Enel bought the rest of Camuzzi for US$870 million from Mill Hill NV. In 1997, Camuzzi gained a 20 year concession contract for water and wastewater services for the town of Massa, serving 44,051 and 30,379 people respectively. Camuzzi's subsidiary Gazometri in total manages 5 concessions in Lombardy, Tuscany and Abruzzo and supplies 40,195 customers. 6% of the group turnover in 1999 was in environmental services. Argentina 1994/1996 Balacarse & Laprida 20 year concessions 45,000 water and wastewater The concessions cover two towns in the Buenos Aries region. Camuzzi holds 100% of Aguas de Laprida and 70% of Aguas de Balacarse. The concessions serve a total of 17,835 customers. US$3.54 million has been spent on infrastructure development since 1994, with a 2001 turnover of US$1.74 million. Contact Details Name: Enel SpA Address: Viale Regina Margherita,

125/137, 00198 Rome, Italy Tel: +39 6 8509 1783 Fax: +39 6 8509 3659 Web: www.enel.it Piero Gnudi (Chairman) Paulo Scaroni (CEO) Fluvio Conti (CFO)



ENI SPA Eni SpA is a petrochemicals and gas company, which is 30% held by the Italian Government after a Government divestiture programme. It acquired 41% of Italgas’ equity in 1991, and acquired the outstanding shares in June 2003. Currently Eni SpA is evaluating a plan to divest Italgas’ water interests. The company announced that it was seeking to sell its 67% holding in Acque Potabili in April 2004. Italgas had €129 million in water sales in 2001. Water sales have fallen from 43 million m3 in 2002 to 370million m3 in 2003, mainly due to the dry weather and attent water shortages. 10million m3 of wastewater was treated in 2003 at 18 wastewater treatment works, compared with 17million m3 in 2002. The principal subsidiaries are Acque Potabili (see separate entry), Acquedotto di Savona, Acquedotto Vesuviano, Eniacqua Campania, Metano Arcore and Napoletana Gas. In 2001, the company served 1.94million people. Eni SpA, profit and loss account

Y/E 31/12 (€million) 2000 2001 2002 2003 Turnover 47,938 48,925 47,922 51,487 Operating profit 10,845 10,445 8,502 9,517 Net profit 5,771 7,751 4,593 5,585 Earnings per share (€) 1.44 1.98 1.20 1.48

In 2000, the city of Naples set up a JV with Italgas to manage its water and gas services. The JV is 55.4% held by the city and 43.6% held by Italgas. In turn, it holds 51% of Napoletana Gas, Italgas's natural gas subsidiary in the city and 100% of Arin SpA, the previously municipally owned water company serving the city. The JV will have a turnover of Lira500 billion (US$254 million), serving 600,000 industrial and 4million domestic customers. Italgas is also seeking agreements with the municipalities of Rome and Turin about developing operational synergies. In January 2003, Eni bid for 75% of Ente Acquedotto Siciliani, which supplies water to Sicily. Eni also acquired FS Hydro, the water management arm of the Italian railway network. Contact Details Name: Eni SpA Address: Piazzale Enrico Mattei,

100144 Rome, Italy Tel: +39 06 59821 Fax: +39 06 59822141 Web: www.eni.it Web: www.italgas.it Roverto Poli (Chairman) Vittorio Mincato (CEO) Marco Mangiagalli (CFO)



HERA SPA Hera Spa operates in a number of municipalities in northern Italy, providing water and wastewater services to 640,000 customers and 490,000 customers respectively in chiefly in Bologna, Ravenna-Lugo, Forli-Cesena, Rimini, Savignino and Imola-Faenza. The company was founded through the consolidation of 12 municipal entities in 2001. 2million people in 127 municipalities are served by the company for water, sewerage, power, gas and waste management, rising to 3million in the summer. Hera aims to acquire local utilities in order to increase its size and improve operating efficiency over the next four years. 44% of Hera’s equity was sold in June 2003, with the commune of Bologna holding 19.8% of the company via Seabo Spa. Hera SpA, profit and loss account

€million 2001 2002 2003 Sales 1,041.6 1,133.3 1,331.3 Operating profits 83.0 77.6 112.8 Net profits 36.8 33.2 49.4 Earnings per share (€) 0.045 0.042 0.042

Hera SpA, water activities

Revenues Customers €million 2001 2002 2002 2003 Water 150 163 616,860 639,563 Sewerage 12 15 470,343 487,342 Sewage treatment 48 48 528,297 544,943 Revenues 210 226 N/A N/A Total turnover 235 256 N/A N/A EBITDA 52 54 N/A N/A

The principal water concessions are secured until at least 2012.

2002 2003 Municipalities served – Water 127 130 Municipalities served – Sewerage 88 89 Municipalities served – Wastewater 123 125 Residential population 1.9million 2.0million Water sold (million M3) 176.3 180.2

Acquisition of Agea In August 2004, Hera acquired a further 51% of Agea having bought 49% of the company for €65 million in 2003. Agea provides multi utility services in Ferrara province. Acosea owns the water assets through Acosea Reti and opoerates them through Acosea Spa. Acosea Impianti, a new company is to take over Acosea Reti and sell these assets to the Ferrara municipalities in 2005, while Acosea Spa will be integrated into Hera. Acosea generated water sales of €29 million in 2003, selling 20.8million m 3 of water. Contact Details Name: Hera SpA Address:

Viale Carlo Berti Pichat 2/2, 40127 Bologna, Italy

Tel: +39 051 287 111 Fax: +39 051 281 4036 Web: www.gruppohera.it Tomaso Tommasi di Vignano (Chairman) Stefano Aldrovandi (CEO)



META SPA Meta SpA serves the city and province of Modena in northern Italy and was originally owned by a consortium of 30 local municipalities. It was privatised in March 2003, through a new equity issue and a partial divestiture by 17 of the municipalities. 72% of its equity remains in municipal hands, with the commune of Modena holding 58% of the company. Meta serves 413,000 people with power, gas, water, heating and waste services. Water sold rose from 28.4million m3 in 2002 to 29.8million m3 in 2003, serving 312,052 residents in 18 municipalities at the end of 2003. Some 210,000 residents are also served by the sewerage system and sewage is treated for 324,193 residents. There are a total of 644,289 residents in the province of Modena. Meta SpA, profit and loss account

YE 31/12 (€million) 2000 2001 2002 2003 Water sales 22.4 23.7 26.5 29.7 Total sales 189.8 250.0 262.6 295.2 Operating profits 16.8 21.1 26.3 35.7 Net profits 5.5 8.1 12.6 17.9 Earnings per share (€) 0.045 0.067 0.100 0.142

56% of water revenues were for water distribution, 27% for wastewater treatment and 6% for sewerage. In order to build up its client base in the face of increasing competition, Meta plans to spend €220 million between 2003 and 2005 on acquisitions and service expansion. Meta is also considering merger options with Aimag Spa of Mirandola a local utility company. In early 2004, Meta entered into talks abouyat the possible merger with AGAC Spa (Reggio Emilia), AMPS Spa (Parma) and TESA Spa (Piacenza) into a single major national multi utility group that would deliver more than 100million m 3 of water. Contact Details Name: Meta SpA Address:

Via Cesare Razzaboni 80, 41100 Modena, Italy

Tel: +39 059 407 111 Fax: +39 059 407 040 Web: www.meta.mo.it Guilio Sapelli (Chairman) Stefano Querci (MD)

MALAYSIA PART 3: COMPANY ANALYSIS


MALAYSIA ECO WATER Eco Water (EW) provides sewage and effluent treatment systems and services for municipal and industrial customers, with 93% of 2003 revenues being accounted for by services. The company was founded in 1995 to provide wastewater treatment services to the Malaysian rubber industry. Almost all activities continue to be in Malaysia, which accounted for 97% of turnover in 2003. Currently activities are mainly based in southern Malaysia. China has been identified as the principal target market. The company was floated on the Singapore exchange in 2003. Eco Water, profit and loss

FY 31/12 (S$ million) 2000 2001 2002 2003 Sewage treatment systems 4.99 8.18 12.74 15.09 Industrial effluent systems 1.23 0.61 1.98 2.68 Water treatment systems 0.00 0.00 0.00 0.17 Turnover 6.22 8.79 14.71 17.94 Operating profit 0.53 0.48 3.11 3.22 Pre-tax profit 0.53 0.47 3.04 3.17 Net profit 0.37 0.33 2.17 2.35 Earnings per share (S$) 0.48 0.44 2.77 2.64

Industrial customers vary year by year due to the relatively short term nature of contracts. The main customer is the Ramatex Berhad Group, which accounted for 13.5% of 2000 turnover and 3.3% in 2002 including EW’s activities in Namibia. In all, 17 industrial customers have accounted for 5% or more of group turnover in any one year between 2000 and 2002. In June 2004, Eco Water entered into a joint venture with China Yunnan Lanping TL Hydraulic Power Co., Ltd to incorporate a joint venture company in Yunnan (Yunnan Tian Long Eco Water Hydro Investment Co, Ltd) to seek business in water & wastewater treatment and environmental related projects, water-to-energy such as hydro power. Eco Water is initially subscribing RMB6 million to the JV, which will have a registered capital of RMB86 million, mainly accounted for by debt finance. Contact Details Name: Eco Water Address:

43 Tampines Street 92, Singapore 528887

Tel: +65 6783 8638 Fax: +65 6789 8208 Web: www.ecowater.com.sg Tan Doo Chai (MD) Hen Peng Siang (Director) Chua Ee Leng (Finance Manager)



INTAN UTILITIES BERHAD Intan Utilities Berhad (IUB) owns Metropolitan Utilities Sdn Bhd (MUC). In 1989, MUC gained a 20 year concession for bulk water provision, treatment and supply to Lembaga Air Perak, the state government of Perak’s water authority. Under the concession, MU supplies water to Ipoh, the state capital, and the regions of Ulu Kinta, Sungai Tarap and Tanjung Talang. In 1996, the concession was extended to 2024. IU was floated on the Kuala Lumpur Stock Exchange in July 1997 and in June 1998, Veolia Water Asia Pacific Pte Ltd (VWAP) acquired 26% of IUB to become its largest individual shareholder. This share was subsequently increased to 30%. In January 2003, IUB sold 30% of the share capital of MUC to VWAP for RM36 million, with VWAP selling back its 30% stake to IUB and its other major shareholders. Intan Utilities, profit and loss account Y/E 31/07 (MR million) 1999 2000 2001 2002 2003 Water provision 60.8 58.9 60.3 57.0 48.0 Group turnover 67.8 58.9 75.0 71.8 78.7 Operating profit 28.2 24.7 24.3 15.1 12.0 Net income 26.9 19.2 16.6 9.0 6.4 Earnings per share (MR) 0.50 0.36 0.31 0.17 0.12 The concession serves 600,000 people. Profits for the water activities in 2002 were MR25.2 million, falling to MR16.4 million in 2003. The fall in revenues and profits reflects the end of the construction contract for a new pipeline serving the state. During 2004, revenues and margins have stabilised. Following VWAP’s stake acquisitions, VWAP’s CGE Utilities has taken over the operation of the concession, while IUB continues to own the concession itself. Contact Details Name: Intan Utilities Berhad Address:

Manara Berjaya, KL Plaza, 179 Jln Bukin Bintang, 55100 Kuala Lumpur, Malaysia

Tel: +60-3-2935-8888 Fax: +60-3-2935-8043 Web: www.intan.com.my Dato Mohammed Annuar Bin Zani (Chairman) Low Ah Ha (Director) Su Swee Hong (Corporate Secretary) Wong Pooi Cheong (Corporate Secretary)



KUMPULAN PERANGSANG SELANGOR BERHAD Kumpulan Perangsang Selangor Berhad (KPS) was incorporated in 1975 as part of the state of Selangor’s Kumpulan Darul Ehsan Berhad (KDEB). KDEB is designed to encourage private sector investment and participation in developing the state’s infrastructure and services. After a partial divestment from KDEB, KPS was listed on the Kuala Lumpur Stock Exchange on 22 July 2003. In recent years, the company has concentrated upon property development, highways and water concessions. KSB holds 20% of Taliworks Bhd (see separate entry), along with 30% of Splash (Sungei Selangor Water Supply Scheme Phase 3) and 30% of ABASS (Sungai Semenyih Water Supply Scheme). Splash was due to be partly floated this year, but the IPO has been postponed to 2004. In July 2003, Selangor awarded KPS a RM2.5 billion water treatm ent project under the Langat Two Water Scheme. This involves the transfer and treatment of water from Pahang state to Selangor in four equal stages of 545,000m 3 per day, with the first two phases entering service in 2008 and 2009. It is anticipated that Puncak Niaga (see separate entry) will take a significant stake in the project.

FY 31/12 (MR million) 2000 2001 2002 2003 Net sales 184.8 199.2 175.8 237.6 Operating income 38.4 -29.7 16.2 38.4 Infrastructure & utilities profit 13.2 72.8 63.7 59.0 Pre-tax profit 21.1 83.9 82.9 107.0 Net income 22.4 56.0 44.7 57.0 Earnings per share (Sen) 22 56 13 14

Indonesia In August 2003, KDEB signed a memorandum of understanding with Indonesia’s PT Pengembangan Investasi Riau in Sumatra. KDEB and Malaysia’s Putera Capital Bhd entered an understanding with PT Pengembangan Investasi Riau to provide a water supply from the Rokan River to Dumai village in a project worth RM280 million. YBhg Dato' Haji Zabir bin Bajuri (Executive Chairman) YBhg Datin Paduka Juma'ah Moktar (Managing Director) Contact Details: Name: Kumpulan Perangsang Selangor Berhad Address: 16th Floor, Plaza Perangsang,

Persiaran Perbandaran, 40000 Shah Alam

Tel: 603-5510 3999 Fax: 603-5510 9977 Web: www.kdeb.com



PBA HOLDINGS BHD Perbadanan Bekalan Air Pulau Pinang Sdn Bhd (PBA), a subsidiary of PBA Holdings BHD, is a water supply company operating in raw water abstraction, water treatment and supply. PBA operates a 30 year water concession in Northern Penang, Malaysia. The company was floated on the Kuala Lumpur Stock Exchange in April 2002, when 45% of PBA’s equity was sold by the state Government, raising MR194 million (US$51 million). In 1999 the Penang Water Authority was corporatised as PBA. Currently the company has a monopoly in the water supply industry in Penang catering for the water requirements of a population of about 1.26million people (356,628 connections) as well as 46,149 commercial and industrial customers. The state has six dams with a total water storage capacity of 46.0million m3. Currently, PBA has a total design capacity to supply about 1.17million m3 of treated water per day from its 10 treatment plants to meet the average daily demand of 0.76million m3. The network is in relatively good order, with non revenue water at 19.4% in 2003 compared with the national average of 38.9%. PBA aims to reduce NRW to 18% by 2005. Commercial and industrial usage fell by 3.8% in 2003 due to increased outsourcing to China, while domestic consumption rose by 1.6%. Perbadanan Bekalan Air Pulau Pinang Sdn Bhd, profit and loss account

Y/E 31/12 (MR million) 1999 2000 2001 2002 2003 Sales 101.2 105.2 112.1 142.9 141.1 Operating income 61.2 51.5 47.6 54.3 35.2 Net income 51.3 39.3 41.6 50.3 40.6 Earnings per share (Sen) 1.83 1.41 1.81 1.59 1.23

China 2003 Yi Chun City 30 year BOT 250,000 water The BOT was awarded to PBA’s Pinang Water Ltd. PWL is 26% held by PBA, along with the Malay construction firms KWU Far East Sdn Bhd (37%) and YLI Holdings Bhd (37%). Yi Chun is in Jiangxi Province, near Shanghai. The project involves the construction of a 100,000m 3 per day water treatment plant in two equal phases, the first entering service in July 2004. The project is forecast to generate revenues of RMB243 million with an initial investment of RMB12 million. Contact Details: Name: Perbadanan Bekalan Air Pulau Pinang Sdn Bhd Address: 32/F Komtar, 10000 Penang,

Malaysia. Tel: +60-4-263-4200 Fax: +60-4-261-3581 Web: www.pba.com.my Koh Tsu Koon (Chairman) Liew Chook San (CEO) Ang Weng Joo (CFO)



PPB GROUP BERHAD PPB Group Berhad is a conglomerate active in sugar refining, flour and feed milling, edible oils processing, oil palm cultivation, film exhibition and distribution, property development, shipping and waste management. Utilities and environmental engineering activities are undertaken by its subsidiaries Chemquest Sdn Bhd and Chemical Waste Management Sdn Bhd. PPB Group Berhad, profit and loss account

FY 31/12 (MR million) 2000 2001 2002 2003 Net sales 5,240.3 5,629.1 7,858.0 9,319.8 Operating income 266.3 235.1 377.8 554.6 Net income 244.5 170.3 243.0 371.3 Earnings per share (Sen) 49.8 34.7 49.5 75.7

China Kerry Utilities Limited (KUL), a 50% overseas subsidiary of PPB Group is leading a consortium to run the RMB 201 million Lugouqiao Sewage Treatment Plant (Phase I) project in Fengtai District, Beijing. The contract was awarded in July 2003. KUL holds 51% of Beijing Kerry Veolia Waste Water Treatment Company (BKV) with Veolia Environnement. Kerry Utilities is subscribing RMB21.4 million to BKV, which is to fund the construction of the sewage treatment plant with a treatment capacity of 100,000m3 per day in preparing Beijing for the Olympics 2008. The consortium will raise RMB85 million for the project while the BWDG will fund the RMB116 million balance with loans from the World Bank. A 20 year operating concession will start in July 2004 and will generate total revenue in excess of RMB1 billion over the concession period. This is the first international WWTW BOT in Beijing. Contact Details Name: PPB Group Berhad Address: Wisma Jerneh, 38 Jalan Sultan Ismail,

50250 Kuala Lumpur, Malaysia Tel: 603 2141 2077 Fax: 603 2141 8242 Web: www.ppbgroup.com

www.chemquest.com Ong Le Cheong (Chairman) Datuk Oh Siew Nam (Deputy Chairman) Dato’ Lim Chee Wah (Executive Director)



PUNCAK NIAGA BERHAD Puncak Niaga (PN) was incorporated in January 1997 and listed on the Kuala Lumpur Stock Exchange in July 1997. (PN) is the holding company for Puncak Niaga (M) Sdn Bhd (PNSB), which was incorporated in 1989 and gained the water treatment operation and management contract for facilities responsible for 70% of water supplied to the state of Selangor and the Federal Territory of Kuala Lumpur in 1994. A second contract, for expanding the state’s water treatment capacity was awarded in 1997. These contracts cover water provision for 4.1million people in the state. The population of Selangor and Kuala Lumpur is projected to grow from 5.37million in 2000 to 7.94million by 2010. Water demand in 1999 was 2,828Ml/day against a capacity of 2,973Ml/day. Demand is forecast to rise from 3,088Ml/day in 2000 to 5,382Ml/day by 2010. PN supplies 62% of the water requirements of Selangor and Kuala Lumpur. The first privatisation/concession agreement was signed in September 1994 for the operation of 27 working WTPs. The second concession, signed in March 1995, is for a construction come operation agreement for the 950Ml/day Sungai Selangor Water Supply Phase 2 Project (SSP2) treatment plant. Two further agreements cover two additional water treatment plans. The concessions are due to expire at the end of 2020. 33.9% of PN’s equity is held by Central Plus (M) Sdn Bhd and 2.9% by Corporate Line (M) Sdn Bhd, the original investors in PNSB. VE’s CGE Utilities was a subcontractor to PN for the actual operation of the water treatment works. PN is taking over this contract from the start of 2005. Water distribution increased from 582million m3 in 1998 to 702million m3 in 2003, running 28 WTPs and covering 54.6% of the state of Selangor and Kuala Lumpur and Putrajaya. Puncak Niaga, profit and loss account

Y/E 31/12 (MR million) 1999 2000 2001 2002 2003 Turnover 347.47 350.56 552.3 565.1 578.3

Operating profit 150.00 148.30 284.2 316.2 316.8 Net income 99.00 91.20 179.3 127.1 129.6 Earnings per share (MR) 24.6 21.9 41.0 29.0 29.3

The main project has been the development of the SSP2 water treatment plant. Stage 1 was completed in 2000 with a capacity of 475million L per day. Stage 2, costing MR533.9 million, entered service in 2001 and supplies a number of towns and parts of Kuala Lumpur. It also has a daily production capacity of 475million L. Delivery in 2003 was 897.5million L per day. PNSB is involved in the financing, design, construction, operations, maintenance and management of SSP2. PNSB now produces 1,926million L of water per day. It is likely that a third construction phase will be required by 2010. In September 2003 PN was advised that Federal Government has in principle approved the privatization of the water supply services in the state of Selangor and the Federal Territories of Kuala Lumpur and Putrajaya to be undertaken by Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS). PNHB would be required to take up a 70% equity stake in SYABAS. This is still under discussion and is linked with settling some RM940 million of the RM1.2 billion the state owns PN. It is understood that MR2 billion will be needed to replace 6,000km of supply pipes. International developments PN has opened affiliated offices in Brunei, Philippines, Indonesia and Cambodia with the longer term aim of entering these markets on a JV basis. In November 2002, PN gained a MR234 million contract to lay a 1,124km water pipeline to Chennai in India which entered service in 2004 and involves a five year management contract. Contact Details Name: Puncak Niaga Berhad Address: 1401-06, 14th Floor, Plaza See Hoy Chan,

Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia.

Tel: +(60) 3 201 8648 Fax: +(60) 3 201 8658 Web: www.puncakniaga.com.my Y Bhg Dato Rozali bin Ismail (Chairman) Lee Miang Koi (Director, Business Development) Mat Hari bin Ismail (Director, Finance) Ruslan bin Hassan (Vice Chairman)



RANHILL UTILITIES BHD Ranhill Utilities Bhd (RU) is 60% owned by Hamdam Mohamad’s Ranhill Holdings and acts as its water services arm through SAJ Holding Sdn Bhd (SAJH), the state of Johor Water Company. SAJH was set up to operate the state’s water supply services in 1994. In 2000, SAJH was awarded a 30 year concession to operate these services. SAJH was then reversed into Ranhill Holdings, which was in turn floated on the Kuala Lumpur Stock Exchange in June 2002, with 26% of the company’s equity being sold at the time. Ranhill Utilities Bhd, profit and loss account

FY 31/12 (MR million) 2000 2001 2002 2003 Net sales 221.8 358.9 377.2 423.6 Operating income 20.0 113.7 115.9 141.4 Net income 19.7 114.9 80.2 94.5 Earnings per share (Sen) 9.1 57.5 31.6 32.1

SAJH has 43 water treatment plants and a 9,000km distribution network. Water provided meets WHO and Ministry of Health standards, and distribution losses are planned to fall to 20% as part of a 2000-2003 infrastructure investment plan costing MR680 million. The MR650 million Semangar water supply scheme is to be operational in 2003. The 2004-08 capital spending plan is for MR 999 million. Long term plans include expanding water consumption from 1,163Ml/day in 2000 to 1,764Ml/day by 2010. SAJH had 722,832 customer connections in April 2002: 632,391 domestic, 88,704 industrial and 1,737 institutional. Hamdan Bin Mohamed, who owns 60% of both Ranhill Holdings and Ranhill Utilities Bhd is considering combining the two companies so as to build its capital base for bidding for further water contracts, mainly in Malaysia. China In July 2003, RU gained a 30 year BOT to build and operate a 100,000m3 per day water treatment plant for Yi Chuan City in Xiangji Province, China. RU will hold 26% of the operating company, which will invest MR37 million into the project. Contact Details Name: Ranhill Utilities Bhd Address: 2-12 Jalan Setiawangsa 10,

Taman Setiawangsa, 54200 Kuala Lumpur, Malaysia.

Tel: +60-3-4252-2020 Fax: +60-3-4260-2020 Web: www.rubhd.com.my Web: www.saj.com.my Tan Sri Dato' Paduka (Dr) Sallehuddin Jaafar bin Mohamed (Chairman) Dato' Dr. Shahir bin Nasir (Non-Executive Director) Hamdan Bin Mohamed (President) Ahmad Zadhi Bin Jamal (CEO)



SALCON ENGINEERING BERHAD Salcon Engineering Berhad (SEB) was set up as a subsidiary of Kumpulan Emas Berhad in 2002, building upon KEB’s experience in the palm oil industry and engineering services for processing palm oil and treating process effluents and for providing water for these facilities. KEB has been involved in 450 water and wastewater engineering projects in Malaysia, Thailand, Vietnam and China since 1974. SEB was Listed on the KLSE in August 2003 via a reverse takeover of Seng Hup Corporation Bhd. Turnover is forecast to increase from RM153 million in 2002 to RM389 million by 2004 due to various water engineering and O&M projects. SEB concentrates on water and wastewater plant design, engineering, installing and O&M, along with related projects for the palm oil, timber and agricultural sectors. The Water & Environmental Division accounts for more than 50% of the company’s turnover and profits. SEB was part of the consortium that gained the RM 308 million Greater Ipoh Water Supply II BOT in Perak. In October 2002, SEB gained a 10 year O&M contract for the Sungai Terip water treatment plant in Negeri Sembilan, including five supply dams and a raw water pumping station. The contract is worth RM200 million. This contract accounted for 10.3% of group turnover in the first half of the current year and will contribute RM23 million in the 2004 financial year. This was followed by a one year RM35 million leakage reduction project in 2003 with Jabatan Air Sabah.

YE 31/07 (MR million) 1998 1999 2000 2001 2002 Water & environment turnover 70.9 71.4 55.1 94.3 126.1 Wastewater turnover 0.0 0.0 0.0 0.0 14.1 Turnover 126.0 102.4 104.0 129.8 153.5 Water & environment profit 6.3 12.5 11.6 14.9 10.7 Wastewater profit 0.0 0.0 0.0 0.0 1.9 Group operating profit 7.7 12.1 10.9 15.1 12.8 Net profit 6.1 12.1 12.9 12.5 12.5

Comparable data has not been produced for the 2003 financial year due to the change in corporate status. 90% of revenues for the 2004 financial year to date and in water related activities. In Vietnam, Salcon was part of the consortium involved in the US$35.8 million 100,000m ³ per day Binh An Water Supply Scheme for Hi Chi Minh City. The O&M element runs for 20 years. China In April 2004, Salcon Water (HK) Limited was awarded a 30 year O&M contract with Linqu County, Anqiu, Qingzhou and Changyi in Weifang, (Shandong Province) for the operation and maintenance of water supply sources, laying and maintaining pipelines, metering and the collection of water revenues. The consumption of water in Linqu County is currently estimated at 0.15million m 3 per day. Salcon will hold 75% of the equity of each project and total investment for the 50 year concessions will be RMB 200 million. Salcon Water (HK) also holds 75% of the equity of the Shandong Changle Salcon Water Supply Company, which has 50 year water provision services concession for Changle County in Shandong. The stake was acquired for US$1.44 million. In June 2004, an additional Strategic Partnership Agreement for the development of a 0.30million m3 per day water supply project in Linyi City, Shandong Province was signed. Salcon Water (HK) Limited will hold a 40% shareholding, Linyi Municipality Industrial Product Jin Yin Real Property Development Company Ltd, China will hold 50% while the Linyi Municipality Water Supply Company will hold 10%. This is a 30-year concession to design, construct, operate, maintain, distribute potable water, with an estimated project cost of RMB600 million. The JV company will have an initial registered capital of RMB200 million. Contact Details Name: Salcon Engineering Berhad Address: 17th Floor, Menara Summit,

Persiaran Kewajipan, USJ 1, 47600 UEP Subang Jaya, Selangot, Malaysia

Tel: 6(03) 8024 8822 Web: www.salcon.com.my Tan Sri Razali Ismail (Chairman) Teoh Seng Kiang (Vice Chairman) Lim See Teok (CEO) Dr Teoh Seng Foo (President)



TALIWORKS CORPORATION Taliworks Corporation (TC) has been involved in the management, operation and maintenance of water treatment plants and the supply of treated water since Malaysia’s first privatisation in 1987. It supplies 1.04million m 3 per day of water to the state of Selangor, the federal territory, and Langkawi Island, serving 4.1million people through the operation of six water treatment plants. Companies are as follows: • Sungai Harmoni (100% held): Sungai Selangor Phase 1. One WTW, 897million L/day, expires 2030. • Taliworks Langkawi (100% held): Five WTWs in Langkawi & Perlis, 31million L/day, expires 2020. • CGE Utilities M (45% held): O&M for 25 WTWs in Selangor, 910million L/day, expires in December 2004. • Hydrovest (40% held): Strategic partnership with KPS for new business opportunities In January 2002, the company gained a DBO contract for water services for the Northern Area of Kedah. The MR 120 million contract will be operational in 2004. Taliworks Corporation, profit and loss account

Y/E 31/12 (MR) 1999 2000 2001 2002 2003 Water treatment 85.3 98.6 99.7 111.7 123.9 Total turnover 111.6 116.6 117.5 126.9 134.8 Operating profit 26.9 30.6 31.1 43.0 47.1 Net profit 26.7 22.6 26.8 39.1 36.6 Earnings per share (Sen) 17.9 14.1 15.2 14.8 20.8

Through its connection with KDEB (see entry on Kumpulan Perangsang Selangor Berhad above, who own 20% of Taliworks), the company expects to be involved as a partner in the operational phase of the Langat II Scheme. Construction for the water treatm ent plant for the Langat II Scheme needs to start by 2005 to avoid water shortage problems by 2009. China and Indonesia After gaining a waste management concession in Tianjin in 2004, the company is seeking water and wastewater concessions in China. Taliworks is also tendering for a US$30 million water treatment concession in Sumatra, Indonesia. Contact Details Name: Taliworks Corporation Address: Menara Milenium, Jalan Damanlela,

Pusat Bdr Damansara 50490 Kuala Lumpur, Malaysia

Tel: +60-3-2718-1551 Fax: +60-3-2715-7655 Web: www.taliworks.com.my Web: www.saj.com.my Y Bhg Dato Haji Zabir Bin Bajuri (Chairman) Dato Lim Ak Bak (Vice Chairman) Abdul Rahman Bin Haji Siraj (CEO) Lim Chee Meng (Director)



YTL CORPORATION BHD YTL Corporation Bhd (YTL) has interests in power generation, construction contracting, cement manufacture, property development and hotels, and resorts and leisure. YTL Power (63% held by YTL) is one of the largest independent power producers in South East Asia and has investments in regulated utilities in Australia. YTL Corporation Bhd, profit and loss account

Y/E 06/12 (MR million) 1999 2000 2001 2002 2003 Water & sewerage turnover 0 0 0 137 1,735 Total turnover 2,119 2,110 2,326 2,477 3,857 Operating profit NA 621 739 827 1,439 Net profit 412 383 331 363 512 Earnings per share (Sen) 28 26 23 25 35

YTL acquired Wessex Water Plc (WW) for £1,240 million in May 2002 when WW was sold by Enron. This is the first case of a company based in the developing economies acquiring a water and sewerage company from the developed world. In July 1998 Enron agreed terms with WW for a recommended cash offer for WW. The offer valued WW at £1.7 billion: £1.36 billion for WW’s share capital and WW’s net borrowings, which were £325 million on March 31 1998. It is understood that YTL is examining potential projects in Asia. Wessex Water Services Ltd, profit and loss account for appointed businesses

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Turnover 276.8 257.5 266.8 269.5 288.7 Operating profit 150.3 120.3 117.1 110.3 101.8 Pre-tax profit 121.6 89.5 83.4 70.7 59.0

Wessex Water supplies water to 1.2million people and sewerage services to 2.5million people in south west England. A dry summer in 2003 meant that water availability was 89% of the long term average, with demand increasing by 3% overall and with a peak demand increase of 13%. Leakage is being kept at 75million L/day, which is effectively at the economic level. Two JV companies were formed in 2001-02: • A 50/50 partners hip with Bristol Water - Bristol Wessex Billing Services Limited - to reduce costs and give

customers improved service;

• MWH Wessex Limited, with engineering consultants Montgomery Watson Harza, in which WW has a 51% stake, to manage WW's capital investment programme, the first in the water industry to be based on an equally shared financial pain/gain basis.

Contact Details Name: Wessex Water Services Ltd, Address: Claverton Down Road, Bath BA2 7WW. Web: www.wessexwater.co.uk Colin Skellet (Chairman) Contact Details Name: YTL Corporation Bhd Address: 11th Floor, Tiong Lay Plaza,

55 Jalan Bukit Bintang, 55100 Kuala Lumpur, Malaysia.

Tel: +60-3-2142-6633 Fax: +60-3-2141-2703 Web: www.ytl.com.my Y Bhg Tan Sri Dato Yeoh Tiong Lay (Chairman) Francis Yeoh Sock Ping (MD) Bhg Dato Yeoh Seok Kian (Deputy MD)

MEXICO PART 3: COMPANY ANALYSIS


MEXICO AQUASOL Aquasol is a privately owned Mexican water engineering and operations company founded in 2000 to bid for municipal water treatment concessions in Mexico. In 2003-04, the company gained two concessions and was amongst the finalists for at least another two bids. In December 2003, Aquasol secured a 20 year, US$30 million BOT concession for a 1,200L per second (103,500million m3 per day) agricultural water plant in Michoacan state capital Morelia, said. The facility will enter into service by the end of 2004. In January 2004, Aquasol secured a US$25million, 20 year BOT concession in Hidalgo State’s capital Pachuca. The 400 litres per second (34,500m 3 per day) Pachuca plant will provide two levels of water quality: one for agricultural use and another for industrial customers. Operations are expected to begin later in 2004. In each case, Aquasol is working in a 50-50 JV with Tecnologia Intercontinental (Ticsa, industrial wastewater treatment plant engineering) based in Mexico City. Aquasol strategy is to bid for 20 year BOT concessions because of the federal government's commitment to provide up to 40% of project financing. Typically, private equity makes up another 25% of costs and loans the account for remaining 35%. The company aims to bid for other projects in Latin America when similar financial packages are made available. Contact Details Name: Aquasol SA de CV Address: Paseo del Carmen 30, Col.

La Asuncion, 500000 Toluca, Mexico

Tel: + 722 271 02 73 Alfredo Marin Pasos (Operations Director) Rigoberto Mena (Manager)

THE NETHERLANDS PART 3: COMPANY ANALYSIS


THE NETHERLANDS NUON NV Nuon NV is a Dutch energy utility company, supplying electricity to five million people in the Netherlands. Nuon was formed in 1999 through the merger of four regional Dutch utility companies and is held by two groups of municipal shareholders. The company is expected to be privatised after the liberalisation of the Dutch electricity market in July 2004. Waterbedrijf Gelderland NV (WGld), Nuon NV's water unit, was sold to the municipally held Vitens in 2002 for a net gain of €57 million. This was after the Dutch Government ruled in 2001 that Nuon would have to divest its domestic water activities if it was to contemplate privatisation. With Nuon’s 560,000 water customers in Gelderland and Friesland (2002 turnover of €106 million), including a contract for the supply of water to the municipally held DZH for 132,000 customers in the Lieden area, Vitens serves 1.6million customers (approximately 4.0million people) in the provinces of Friesland, Verijssel and Gelderland and parts of the provinces of Flevoland and Drenthe. Vitens is 36% held by Nuon. Nuon NV, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Turnover 3,291 3,716 4,742 4,728 5,095 Operating profits 273 327 489 350 536 Net income 976 352 375 152 236

In March 2000, Nuon acquired a 50% stake in Biwater Capital BV, creating the Cascal JV. Biwater Capital is the operations and investments arm of Biwater Plc (See separate company entry). Nuon paid US$130 million for its holding in the JV. The intention is first to increase market share within the Netherlands via Biwater’s capabilities and then to market Biwater internationally through Nuon’s international experience. This contract ceased to apply for concessions gained by Biwater from the start of 2001. Cascal BV, profit and loss account

YE 31/03 (US$ million) 2001 2002 2003 2004 Water supply turnover 53.8 61.4 69.0 80.5 Water contracting turnover 11.1 11.2 8.1 7.1 Group turnover 64.9 72.6 77.1 87.6 Operating profit 10.2 13.0 15.4 22.9 Pre-tax profit 10.3 9.5 11.0 20.1

Cascal, number of people served internationally

Country Water Sewerage Total USA 905,000 0 905,000 Indonesia 690,000 0 690,000 UK 500,000 0 500,000 Chile 9,000 419,000 419,000 Philippines 370,000 370,000 370,000 South Africa 360,000 0 360,000 Belize 150,000 0 150,000 Mexico 0 80,000 80,000 Kazakhstan 30,000 20,000 30,000 Grand Total 3,014,000 1,109,000 3,304,000

UK Biwater was the first company to acquire a SWC, East Worcester Water, in 1988. This was sold to Severn Trent in 1992. Bournemouth Water (founded in 1863) and West Hampshire Water (founded in 1893) were both acquired in 1989 and merged in 1993. The company has 185,000 connections, serving 416,000 people, rising to 500,000 in the summer. These activities have formed the backbone of Biwater's profitability in recent years. Capital spending for 2000-05 will be £45.6 million against £44.8 million in 1995-00. This contract is 100% held by Cascal and will run in perpetuity, subject to 10 years notice of termination. Philippines

1996 Subic Bay 25 year concession 370,000 water & sewerage



The Subic Water and Sewerage Company is a JV with local partners, serving Subic Bay Freeport and Olongapo City. The contract involves capital spending of US$150 million in the first 10 years, with US$250 million over the concession's life. Indonesia

1995 Batam Island 25 year concession 650,000 water provision Cascal has a controlling interest with local partners (Cascal 50% and PT Bangun Cipta Contractors 50%). Batam Island industrial zone is 2 miles from Singapore. The concession involves US$100 million of capex in the first 10 years and US$200 million over the concession's life (Rp 37.5 billion). Leakage has been reduced from 49% to 25%. Water demand grew by 10% in 2002-03, with 69,000 customer connections. In 2003-04, connections rose by a further 18% to 81,000.

2000 Talang Kelapa 20 year concession 40,000 water provision Talang Kelapa is situated to the north of Palembang. The aim is to provide potable water for up to 200,000 people, as well as industrial users, in an area characterised by water shortage. The concession is being operated with two local partners. Chile

1994 Santiago Concessions 9,000 water & wastewater Biwater has acquired several small companies outside Santiago, with concessions serving medium to high quality residential and industrial areas in the North and East of the city. These are grouped together as Aguas Santiago SA. A water treatment works for the Pan de Azucar concession area is being constructed during 2004. The company seeks to buy one or more of the water utilities currently being sold off, and owns US$50 million in water rights.

1994 Antofagasta 30 year concession 260,000 sewage treatment This is the first privatised WWTW in Chile. The Antofagasta facility serves one of the driest parts of the world, with only 3.3mm of rainfall pa. The facility handles a population of 300,000 and recycles the water, selling it on to industry, farms and households.

2000 Calama 20 year concession 150,000 sewage treatment The concession has been modelled on the Antofagasta contract. Cascal has carried out complete refurbishment of the existing treatment plant, which is owned by ESSAN (a local utility). The 7.9million m3 pa facility entered service in October 2002.

2001 Noranda 15 years Industry This project provides 3.9million m3 pa of treated wastewater to industry in La Negra, Chile, some 35km from Antofagasta. Kazakhstan

1998 Karasai 5 year O&M 30,000 water & sewerage Cascal provides water and sewerage services to Karasai, on the outskirts of Almaty. There has been a major improvement of the service, with water provision going from 4–6 hours per day to a 24-hour service. Billing was only introduced once the service was seen to have improved. A 25% collection rate has been improved to 90% following the improvement in service. Cascal has an option to buy the water supply company. Mexico

1993 Puerto Vallarta 15 year BOOT 80,000 sewerage The first sewerage BOOT in Mexico, with a WWTW to secondary standard that entered service in 1995. This has enabled Puerto Vallarta to develop into a major international holiday resort. It has a production capacity of 216Ml per day.



Belize

2001 Belize City In perpetuity 150,000 water and sewerage Cascal took over the running of Belize Water Services after winning an international bid. Cascal have already reduced non-revenue water (by 11% during 2003), optimised the bulk transfer of water by utilising dedicated pipelines at low pressure, increased public relations and upgraded the offices. Turnover increased by 21% in 2003. USA: Utilities Inc

2002 USA Asset Owning 905,000 water and sewerage Nuon acquired Utilities Inc. of Chicago in March 2002 for US$275 million. Utilities Inc was founded in 1965 and is the holding company for approximately 90 subsidiaries providing residential water and/or wastewater services to more than 255,000 customers (approximately 905,000 people) in 400 municipalities in Arizona, Florida, Georgia, Illinois, Indiana, Louisiana, Maryland, Mississippi, North Carolina, Nevada, New Jersey, Pennsylvania, Ohio, South Carolina, Tennessee, Virginia and Kentucky. 10 subsidiaries were acquired during 2003, increasing the number of people served by 80,000. In 2002, Utilities Inc.'s revenues were US$61 million. South Africa

1999 Nelspruit 30 year concession 360,000, water provision The 300 million Rand concession covers the Maputo Development Corridor in Mpumalanga Province, the fastest growing municipality in the country. This is the first full privatisation in South Africa. Biwater is to take over billing and revenue collection while modernising the facilities. Cascal has focused the concession on improving and expanding service delivery to townships. UFW fell from 23% to 16% from 2001-2003. Tanzania 2003 Dar es Salaam 10 years, lease 3million water & sewerage Finance is com ing from the African Development Bank (US$48 million), the European Development Bank (US$37 million), Cascal and HP Grauff (US$8.5 million), DAWASA (US$12.5 million) and the World Bank (US$55 million). The project will concentrate on reducing UFW, refurbis hing water and sewerage systems, upgrading billing and metering and making DAWASA self financing. Cascal bid US$0.34 per m 3 as the base tariff. Contact Details Name: Nuon NV Address:

Spaklerweg 20, 1096 BA, Amsterdam, The Netherlands

Tel: +31 20 597 43 35 Fax: +31 20 597 42 20 Web: www.nuon.com Web: www.utilitiesinc-usa.com Ludo Van Halderen (Chairman) Peter Erich (COO) Henk Spaan (CFO) Contact Details Name: Cascal BV Address:

PO Box 41920, 1009 DC Amsterdam, The Netherlands

Tel: +31 20 597 4222 Fax: +31 20 597 2324 Web: www.cascal.nl Stephane Richer (Chief Executive Officer) Clees Zonneveld (CFO) Paul Gledhill (COO)

PHILIPPINES PART 3: COMPANY ANALYSIS


PHILIPPINES AYALA CORPORATION Ayala operates in real estate development, financial services, information technology and telecommunications services. In 1997, it formed part of the Manila Water joint venture with United Utilities and Bechtel for operating the eastern zone concession for Metro Manila. After the World Bank’s IFC bought a 9% stake in Manila Water for US$15 million in 2004, Ayala holds 52.3% of the company (Ayala 43.6%, Bank of the Philippine Islands, 9.7%), along with United Utilities (UK, 16.9%) and Mitsubishi Corporation (Japan, 9.7%). Ayala Corporation, profit and loss account

FY 31/12 (PHP million) 2000 2001 2002 2003 Net sales 20,793.1 26,693.2 24,304.8 28,783.4 Operating income 9,022.3 7,806.3 2,870.4 3,193.4 Net income 2,428.0 2,105.3 2,407.3 3,087.1 Earnings per share (PHP) 0.17 0.12 0.13 0.16

Manila Water

1997 Eastern Manila 25 year concession 3.4million, water & sewerage Manila Water gained the contract for the eastern zone of Manila’s Metro Manila Water and Sewerage System (MWSS). This is the richer half of the city including the Makati financial district. US$2.5 billion is to be invested in the eastern zone over 25 years, which serves 4.6million people. Households which are connected to the sewerage system pay an extra 50%. Manila Water has operated profitably since 2001. Manila Water, profit and loss account

FY 31/12 (PHP million) 2001 2002 2003 Water sales 1,180.0 2,111.0 3,062.3 Environmental charges 118.1 209.5 305.9 Sewer charges 78.4 121.3 198.6 Total revenues 1,643.6 2,682.5 3,777.9 Net Income 161.1 558.4 1,150.5

Water supply in 2004 is running at a peak of 780 million L/day. Since the concession started, 140,000 leaks have been repaired, saving 250 Ml/day of water. Currently 9% of people and 11% of households are connected to the sewerage system, and only 0.1% of households have actual wastewater treatment. The company has rehabilitated the Magallanes wastewater treatment plant which processes up to 40million litres of wastewater per day. It is also constructing 27 sewage treatment plants across the area.

Water services 1997 2003 Cost of water (P per m3) 10.70 5.55 Compliance with drinking water standards 91% 100% Non-revenue water 63% 48% Households served 325,000 515,000 Water delivery (million L/day) 440 756 Delivery 24 hours /day 26% 83%

Manila Water currently supplies 515,000 households, 1,000,000million more people than in 1997. 600,000 people in low income areas have been connected to piped water supplies since 1997 through the company’s ‘Tubig Para Sa Barangay’ programme and a further 100,000 are expected to be connected during 2004. P9 billion was spent between 1997 and 2003 and a further P10 billion is budgeted for 2004-2008. Non revenue water is to be eased to 43% by 2007. Manila Water plans an IPO in 2005. The company is currently considering seeking new contracts outside its original territory. Contact Details Name: Ayala Corporation Address: 34th Floor, Tower One Ayala Triangle, Ayala Avenue,

Makati City, 1226, Philippines Tel: 632 848 5643 Fax: 632 848 5846 Web: www.alaya-group.com

www.manilawater.com Jamie Augusto Zobel de Ayala II (Chairman and CEO) Fernando Zobel de Ayala (Vice Chairman and Executive Managing Director)



BENGUET CORPORATION Benguet Corporation was founded in 1903 and is the oldest mining company in the Philippines. Due to the long term decline of its copper and gold mining activities, the company has decided to enter the water concessions market in the Philippines. Benguet Corporation, profit and loss account

FY 31/12 (PHP million) 1999 2000 2001 2002 Net sales 302 280 257 160 Operating income -167 -70 -231 -137 Net loss -415 -400 -546 -301 Loss per share (PHP) -3.64 -3.51 -4.79 -2.64

In 2003, Benguet gained a 15 year contract to manage the Kailangan, Bukidnon water system in Mindanao state in the Southern Philippines. Kailangan had a population of 27,000 in 1995, with 940,000 living in the province of Bukidnon. Benguet also expects to gain a similar contract serving Itogon and Baguio City, the capital of north Luzon and the nation’s summer capital. The Baguio City water project is estimated to cost US$70-$80 million and will include the construction and development of a water reservoir and distribution network for the entire city, providing 50-70 million litres of water a day. Baguio City had a population of 250,000 in 2000, with the population growing at 5% pa. Benguet has been seeking to provide additional water to the city since 1995, using former Antamok open mine in the area as a reservoir with a potential capacity of 9million m3. As of July 2004, Benguet was the sole qualifying bidder after two competitive stages. Contact Details Name: Benguet Corporation Address: One Corporation Plaza,

845 Arnaiz Avenue, Makati City, 1223 Philippines

Tel: 632 812 1380 Fax: 632 813 6611 Web: www.benguetcorp.com Benjamin Romalodez (Chairman, President and CEO)



BENPRES HOLDINGS CORPORATION Benpres is a holding company investing in communications and energy activities. It holds 59% of Maynilad Water Services (Suez, 40% and Metropolitan Bank & Trust Co., 1%), the concession responsible for supplying water to Manila’s west zone. Benpres, profit and loss account

FY 31/12 (PHP million) 2000 2001 2002 2003 Water sales (gross) 0 0 5,266 5,026 Net sales 0 153 5,698 5,213 Operating income -22 -315 -3,137 -3,273 Net loss -354 -9,993 -4,000 -1,907 Loss per share (PHP) -0.077 -2.181 -0.873 -0.416

Manilad Water Services

1997 West Manila 25 year concession 4.3million, water & sewerage Maynilad Water Services, Inc. (MWSI) was awarded the western half of the Metro Manila water distribution concession in August 1997. Maynilad Water is tasked to transform the operation of a 119-year old water utility into an efficient and modern water distribution system, aside from setting up sanitation and sewerage systems. Maynilad Water is meant to supply potable water 24 hours a day to approximately 6million people in the western zone by 2007. While Manila Water had a difficult start due to its low original tariffs, Maynilad has suffered from a mid concession-life crisis. The problems arose when Maynilad took on 90% (US$800 million) of MWSS’ foreign debt, which between 1997 and 2000 doubled in Peso terms from P20 billion to P40 billion due to the Peso’s weakness. Although Maynilad gave notice to halt the concession in March 2003, continuing arbitration and associated legal processes have meant that it continues to run under its current structure. The November 2003 and April 2004 agreement would have resulted in a write-off of P3.8 billion (P3.2 billion in equity and P629 million in debt) and the loss of control in Maynilad. As of July 2004, a new court ruling has meant that the entire arbitration process probably needs to be restarted.

Water services 1997 2003 Non-revenue water 60% 69% Households served 466,000 660,000 Water production (million L / day) 1,600 2,246 Water service coverage 63% 85%

Despite the financial problems, the concession has performed reasonably well. Maynilad has paid $200 million of the $800 million in foreign debts (or concession fees) which it assumed from MWSS at privatization. The 194,098 new individual household connections include 74,266 in urban poor communities. Maynilad’s high non-revenue water rate is in part due to the 1996 bid documents identified only 2,500km of pipelines in the West Zone, when there were in fact 3,700km. The one area of weakness has been the extension of the sewerage service coverage and sewage treatment capacity. This is mainly due to shortage of funds and priorities towards water service delivery. Contact Details Name: Benpres Holdings Corporation Address: Benpres Building, Exchange Road Corner,

Meralco Avenue, Pasig City City, 1223 Philippines

Tel: 632 910 3040 Web: www.benpres -holdings.com Oscar M Lopez (Chairman, President and CEO) J Xavier B Gonzales (COO) Angel S Ong (VP, Finance)

SAUDI ARABIA PART 3: COMPANY ANALYSIS


SAUDI ARABIA SAUDI ARABIAN AMIANTIT COMPANY The Saudi Arabian Amiantit Company (SAAC) was founded in Dammam, Saudi Arabia in 1968. It specialises in manufacturing piping products for water, liquids, oil and industrial applications. Water and wastewater operational contracts have been developed through its subsidiary AmiWater, which has acquired 100% of the equity of Aquamundo. Amiantit seeks to become one of the top ten leading companies in the world that provide drinking water and waste water services. AmiWater has three principal subsidiaries: AquaMundo GmbH (Germany), InfraMan GmbH (Austria) and OMC (Thailand). Inframan InfraMan GmbH, a subsidiary of the AmiWater Group is responsible for the provision of services in operation and management of water supply companies. InfraMan is based in Austria, providing management services for water supply, sanitation services, and hydropower. Amiantit, populations served

Country Water Sewerage Total Romania 200,000 0 200,000 Albania 477,000 25,000 477,000 Montenegro 150,000 150,000 150,000 China 0 400,000 400,000 Total - home markets 0 0 0 Total – international 827,000 575,000 1,227,000 Grand Total 827,000 575,000 1,227,000

Amiantit claims to serve 5million people globally, although details of other projects are not currently available. Romania

2003 Zetea DBOT 200,000 bulk water Amiantit is leadinbg a consortium the Zetea water supply system management project, which is US$50 million. It involves building a water intake from a lake, a water treatment plant, a 137-kilometer pipeline, and connections to the distribution tanks. The system will supply potable water to 200,000 people. Project implementation will start in the spring of 2004 and the water supply system is expected to be completed by 2007. Amiantit already has ductile iron pipe manufacturing facilities in Romania, where the company produces its own raw material. OMC Operation Management Company Ltd (OMC) provides Operation and Maintenance services of water and wastewater treatment plants in the Kingdom of Thailand. OMC, through its subsidiary Wastewater Operation Management Company (WOMC), has formed a joint venture with the Waste Management Authority of Thailand (WMA) in order to operate and maintain wastewater treatment plants. Aquamundo ABB Kraftswerkstechnik of Germany (ABB AG), GW Water Consultants (Bilfinger & Berger AG (Germany) and MVV Energie AG (Germany), formed the Aquamundo JV in May 2000. AquaMundo seeks to gain contracts in the planning, financing and operating of water and sewerage projects worldwide. In April 2003, ABB and Bilfinger & Berger sold their stakes to Inframan. MVV sold its stake to Inframan in January 2004. Albania

2003 Four Albanian towns 5 year O&M 400,000 water & wastewater A JV Berlinwasser International (60%) and Aquamundo (40%) gained a five year €4 million contract to take over management of water supply and wastewater disposal in the Albanian towns of Durres, Fier, Lezhe and Saranda. The project is supported by €20 million in funding from the World Bank. Sewage treatment will be upgraded to secondary (biological) standards and water supplies will be improved from four hours daily to a 24 hour supply. In 2002, Aquamundo gained a 4 year O&M contract drinking water (77,000 people) and wastewater disposal services 25,000 people) in the town of Kavaja. This projects seeks to reduce unaccounted for water from 40% to 15%, while raising billing from 60% to 95% and to improve access to water from 4-6 hours to 24 hours a day.

SAUDI ARABIA PART 3: COMPANY ANALYSIS


Montenegro

2001 Montenegro 30 year concession Water and sewerage In the former republic of Yugoslavia, Aquamundo has gained a contract for the proposed privatisation of water provision services in the state of Montenegro, with investments of €33 million required during the first five years. The contract covers the coastal municipalities of Herzeg Novi, Kotor, Tivat, Budva, Bar, Cetinje and most likely later Ulcinj Public Enterprise (PEW) for Water ÒCrnogorsko Primorje Ó, BudvaMonteAqua, a public-private water company in which Aquamundo has the largest shareholding, will manage the 30 year concession. China

2002 Foshan 20 year concession Sewage treatment The Aquamundo (45%) and Foshan Waterworks (55%) JV are to develop and manage the 100,000m³ per day sewage treatment works for the city in Guandong Province. €30.4 million in capital expenditure will be required, 40% from equity and 60% from debt. The facility will become operational in 2003. It is estimated that the facility will serve 400,000 people. Saudi Arabian Amiantit, profit and loss account

Y/E 31/12 (SR million) 1999 2000 2001 [1] 2002 2003 Revenues 646.2 768.9 754.1 1,219.0 1,621.6 Operating profits 175.1 189.2 135.8 158.9 119.5 Net profits 105.4 109.9 80.8 101.1 78.3 Earnings per share (SR) NA NA 6.22 7.43 5.59

[1] Nine months Contact Details Name: Saudi Arabian Amiantit Address: P.O. Box 589 Dammam 31421, Saudi Arabia Tel: + 966 3 847 15 00 Fax: + 966 3 847 16 45 Web: www.amiantit.com Eng. Fareed Al Khalawi (CEO and Managing Director) Contact Details Name: InfraMan GmbH Address: Spiegelgasse 8/5, 1010 Vienna, Austria Tel: +43.1.513064610 Web: www.aquamundo.com Volker Mitterhammer (Managing Director)

SINGAPORE PART 3: COMPANY ANALYSIS


SINGAPORE ASIA ENVIRONMENT HOLDINGS LTD Asia Environment Holdings (AEH) was listed on the Singapore Stock Exchange in November 2003. AEH operates in China under the Penyao trade name and since its foundation in 1984 has progressively moved from water engineering to turnkey contracting to offering BOT contracts. Since 2001, one water treatment plant and four wastewater treatment plants constructed by Penyao have entered service in China. China In July 2004, AEH signed a RMB398 million (S$83.98 million) deal to build a water treatment plant in Nantong City in Jiangsu province. The 25 year BOT project will treat and supply 200,000m 3 of water daily to the city. AEH have an option to construct two more phases to provide extra capacity of 400,000 tonnes of water daily. After 25 years, the city government will assume ownership of the plant. Nantong Pengyao Water Supply, Asia Environment's joint venture with a China company, has a registered capital of RMB100 million. The BOT will generate RMB260 million in construction revenue over between 2004 and 2006.

Y/E 31/12 (S$ million) 2000 2001 2002 2003 Water engineering turnover 13.80 10.62 2.68 4.45 Turnkey projects turnover 0.70 5.74 15.65 15.20 Group turnover 14.50 16.36 18.33 19.65 Operating profits 2.06 3.37 6.34 7.24 Net profits 1.58 2.59 5.04 6.39 Earnings per share (S$ cents) 0.79 1.29 2.52 3.51

` Wang Hong Chun (Chairman and CEO) Eric Oh (Chief Financial Officer) Wang Chun Lin (Director, Chairman Penyao) Contact Details Name: Asia Environment Holdings Limited Address: 77 Robinson Road, 15-01 SIA Building,

Singapore 068896, Singapore Tel: +65 6323 2343 Fax: +65 6323 4223 Web: www.asiaenv.com



BOUSTEAD SINGAPORE LTD Boustead Singapore is an investment company specialising in a range of engineering applications, information technology and investment services. Engineering activities include process control systems. Water engineering activities are carried out through Salcon Limited (not related to Salcon Bhd., see Malaysia company entry), of which Boustead acquired 63% in 2003. Salcon Limited has completed a number of water and wastewater treatment plants in Asia and the Middle East in 2004, generating revenues of $43 million.

Y/E 31/03 (S$ million) 2001 2002 2003 2004 Group turnover 118.3 129.3 200.8 227.0 Operating profits 4.2 6.1 20.4 29.9 Net profits 3.3 -5.3 10.1 13.3 Earnings per share (S$ c) 1.9 -2.9 5.2 6.3

Indonesia In July 2004 Boustead signed a Heads of Agreement with the Sultan of Yogyakarta, for the Government of Yogyakarta Province, Indonesia for a 25 year BOT for the supply of treated water to the city of Yogyakarta and its sub districts of Sleman and Bantul with a total population of 2.2million people. Currently, just 19.8% of the Province is provided with potable water at the moment. With the completion of the whole project, it is expected that 60 to 70% of the population will be supplied. The project is to be carried out in three phases. Phase 1 will have a capacity of 100,000m 3 per day and will cost US$35 million to develop. Phase 2 is expected to be executed by 2009 and will expand the water supply facility to a capacity of 300,000m 3 per day for US$20 million. Phase 3 is expected to be completed by 2004 at a cost of US$20 million and will have a capacity of 300,000m 3 per day. Boustead intends to own 49% of the equity of the project. Site work is expected to commence in the last quarter of 2004 and is expected to be completed in the beginning of 2006. The Engineering, Procurement and Construction (EPC) contract for the whole project will be carried out by Boustead's Water and Environmental Division, which includes Salcon Limited. The EPC portion of the contract is expected to generate material income for Boustead's Water and Environmental Division. Contact Details Name: Boustead Singapore Limited Address: 63 Ubi Avenue 1, 06-01 Boustead House,

Singapore 408937, Singapore Tel: +65 6747 0016 Fax: +65 6741 8689 Web: www.bousteadco.com Wong Fong Fui (Chairman and CEO) Loh Kai Keong (Chief Financial Officer) Saiman Ernawan (Deputy Chairman)



DARCO WATER TECHNOLOGIES PTE Darco Water Technologies Pte (DWT) was listed on the Singapore Stock Exchange in July 2002 in order to improve corporate visibility when tendering for water contracts. The company was set up in 1999 by a group of individuals who had previously operated in the industrial water treatment sector. Target markets are Singapore, Malaysia, China, Taiwan, Indonesia and the Philippines. Darco Environment Philippines was established in August 2002. Darco Water Technologies Pte, profit and loss account

Y/E 31/12 (S$ million) 2000 2001 2002 2003 Water engineering turnover 4.44 13.27 12.25 20.83 Water management turnover 5.66 5.49 6.37 11.66 Group turnover 10.1 18.8 20.20 34.12 Operating profits 0.7 3.6 1.90 3.16 Net profits 0.5 2.8 1.71 2.35 Earnings per share (S$ c) 0.4 2.3 1.2 1.4

DWT has expanded from developing water treatment systems into offering BOT contracts. The company gained a 15 year potable water treatment plant BOT contract in July 2002 for Deqing in Zhejiang Province, China. The contract was awarded to Globe Environmental∗ (70%) with two provinces holding the outstanding 30% of the Zhejiang Deqing Globe Water Treatment Co Ltd. The contract is for the provision of 60,000m 3 of water per day, serving 450,000 people. Supply will start in the second half of 2003 and the contract will generate revenues of RMB370 million (S$79 million). In May 2003, DWT paid US$3 million to acquire a 10% stake in PT Air Bintan Biru (PTABB), with an option to increase this stake to 25%. PTABB was founded in September 2002 to develop water resources and concessions in Riau province of Indonesia and seeks to supply water from the province to Singapore under a 25 year supply agreement. In early 2004 Darco Environmental (Philippines) Inc. secured a BOO contract for the supply of ultra-pure water to SunPower Philippines Manufacturing Ltd., a company engaged in the manufacture of solar cells. This contract is for a period of 6 years. Contact Details Name: Darco Water Technologies Pte Address: 41 Loyang Drive, Singapore

508952, Singapore Tel: +65 6545 3800 Fax: +65 6545 3770 Web: www.darcowater.com Thye Kim Meng (CEO/MD) Alfred Lee (Director) Lee Sue Lin (Director) Teh Swee Heng (Director)

∗ DWT holds 75% of Globe Environmental



DAYEN ENVIRONMENTAL LIMITED Dayen was founded in 1986 for the design and development of water and wastewater treatment systems. In 1998, the company gained its first design and build contract, for an industrial water treatment plant. Since its inception, the company has carried out a wide range of contracts for Singapore’s Public Utilities Board. In December 2001, Dayen was awarded a S$63.9 million contract as part of the construction of the Changi Water Reclamation Plant for Singapore’s Deep Tunnel Sewage System (DTSS), followed by a S$62 million contract in September 2002 to build two turbine generators for the facility.

Y/E 30/09 (S$ million) 2000 2001 2002 2003 Water engineering turnover NA 4.54 4.37 2.40 Wastewater engineering turnover NA 28.59 18.41 41.16 Group turnover 33.56 26.60 27.39 43.88 Operating profits 2.07 1.90 0.40 2.40 Net profits 1.51 1.58 0.30 1.90 Earnings per share (S$ c) 2.9 3.0 0.6 2.9

China Dayen opened a representative office in Beijing in 2002. In April 2003, Dayen (50%) set up Shenfei Dayen, a joint venture with the state-held Shenyang SAC General Products Industry Co Ltd (50%) of China. In July 2003, a consortium of Singapore companies, led by Keppel Land Limited signed a MoA with the Shenyang Hunnan District Government (SHDG) to develop the Hunnan-Singapore Township in Shenyang, capital city of the Liaoning province in northeast China. Dayen will be responsible for developng water and wastewater services. The entire residential township will be developed over six phases in ten years, with each phase consisting of a gross site area of approximately 33 hectares. Master planning for the entire site will be carried out by HDB Corp International Pte Ltd. Development of the first parcel of the first phase of about 1,000 units is expected to commence in 2004. In July 2004, Shenfei Dayen has also secured a contract to build and operate a wastewater treatment facility in Diao Bing Shan City in Liaoning Province, China. The project will require an expected initial investment of RMB30 million and will give Shenfei Dayen operational rights for a period of 23 years for the wastewater treatment plant. Under the contract, the local government agreed to pay Shenfei Dayen RMB0.80 per m3 of wastewater treated, based on a minimum of 15,000m³ of wastewater treated per day. The plant can be expanded to treat 30,000m³ of wastewater per day if the demand exists. In June 2003, Dayen (as a sole investor) signed an agreement to build and operate a water and waste-water treatment facility for the Beijing Jufuyuan Nationality Industrial Area. The project involves an initial investment of RMB20 million and includes the building of treatment facilities over the next few years, will give Shenfei operational rights for 50 years for the water treatment plant and 30 years for the waste water plant. The water treatment plant currently treats 2,500m 3 of water per day and can be expanded to 10,000m³ per day. Water is sold to industrial customers for RMB3.2 per m³ and the project is worth at least RMB640 million over its operational life. Contact Details Name: Dayen Environmental Address: 6 Woodlands Industrial Park,

E1 Singapore, 757729 Tel: (65) 6365 0652 Fax: (65) 6365 1025 Web: www.dayen.com.sg John Lee Thian Guan (Chairman) Kor Hock Lai (Managing Director)



HYFLUX LTD Hyflux Ltd designs, manufactures and operates water and wastewater treatment and conditioning systems. In recent years, the company has entered into a number of industrial water outsourcing contracts. Its traditional customers have been the Singapore Public Utilities Board (PUB) and the Environment Ministry. In 2003, exports to China increased significantly, accounting for 40% of group revenues. In 2003, Hyflux gained a 20 yerar desalination BOT contract from the Singapore PUB. Construction of the Singspring facility will cost S$250 million. This contract will supply 136,000m 3 of water per day for the Government’s Public Utilities Board from 2005 and will run for 20 years, generating S$30-50 million pa. In June 2003, Hyflux acquired Suez’s 30% stake in Singspring Pte Ltd for a "nominal consideration". The total equity investment in Singspring will be S$50 million with the other S$200 million coming from debt financing. Hyflux's share of the equity investment amounted to S$35 million and the company seeks to sell Suez’s stake to another company. Industrial outsourcing in Singapore In November 2002, Hyflux gained a construction and three year renewable operation contract for the provision of process water to ISK’s Tuas titanium dioxide plant in Singapore. ISK is owned by Ishihara Sangyo Kaisha of Japan. Hyflux Ltd, profit and loss account

Y/E 31/12 (S$ million) 2000 2001 2002 2003 Turnover 17.6 27.2 45.3 81.2 Operating profit 6.7 9.3 12.5 20.2 Net profit 4.9 7.4 12.3 19.5 Earnings per share (S$ c) 2.2 2.7 4.2 7.7

Desalination in Tianjin In June 2004, Hyflux was awarded a 30 year BOT to develop a US$90 million 100,000m 3 per day desalination plant serving the Dagang industrial zone of Tianjin in China. The plant will enter service in 2006 and can be expanded to 150,000m 3 per day by 2008. Contact Details Name: Hyflux Ltd Address: 40 Changi South Street 1,

Singapore 486764 Tel: +65-6214-0777 Fax: +65-6214-1211 Web: www.hyflux.com Olivia Lum Ooi Lin (President / CEO / MD) Grace Goh (CFO) Dierdre Murugasu (COO) Foo Hee Kiang (Director)



SEMBCORP INDUSTRIES LTD Sembcorp Utilities (SU), a subsidiary of Sembcorp Industries Ltd, provides multi-utility services for 30 industrial customers on Jurong Island in Singapore. These include industrial process water (30,000m 3 per day via six reverse osmosis plants), demineralised water (900m 3 per hour), cooling and refrigerated water and wastewater treatment via three dedicated facilities (170m 3 per hour) and on an O&M basis. The company has two wholly owned subsidiaries; SUT Sakra and SUT Seraya, which serve 27 corporate customers as well as other Sembcorp subsidiaries in Singapore’s Jurong Island. Sembcorp Utilities, profit and loss account

Y/E 31/12 (S$ million) 1999 2000 2001 2002 2003 Utilities 234.7 302.8 548.3 1,071.9 1,933.0 Total turnover 3,653.1 2,851.9 3,169.9 4,014.4 4,564.8 Operating profit 253.2 240.8 160.4 98.9 215.8 Net profit 398.1 116.7 173.9 171.6 285.1 Earnings per share 2.50 0.73 1.10 0.95 1.57

Sembcorp Water was established in 1999 to gain O&M and BOT contracts for municipal and industrial water and wastewater projects in the region. Sembcorp Water’s 18% stake in Cathay International Water was sold back to Cathay and Cathay International Overseas Holdings for US$44.8 million in June 2003. China A BOT for a wastewater facility for the Nanjing Chemical Industrial Park (NCIP) in Jiangsu Province was awarded to Sembcorp in 2003. Sembcorp has a 75% stake in Nanjing Sembcorp Suiyu, along with while Singapore Utilities International (20%) and Nanjing Chemical Industrial Park Company (5%). The US$10 million first phase will have an initial capacity of 12,500m3 per day and is expected to start commercial operations in the fourth quarter of 2004, serving petrochemical and chemical customers located at the chemical park. The capacity of the plant is expected to increase in tandem with the expansion of NCIP.

Contact Details Name: Sembcorp Industries Ltd Address: 30 Hill Street, #05-04,

Singapore 179360, Tel: +65-6723-3113 Fax: +65-6822-3254 Web: www.sembcorp.com.sg Peter Seah Lim Huat (Chairman) Wong Kok Siew (DC/Chief Executive Officer) Lim Joke Mui (Chief Financial Officer) Low Sin Leng (Chief Operating Officer)

SPAIN PART 3: COMPANY ANALYSIS


SPAIN AGUAS DE BARCELONA SA Sociedad General de Aguas de Barcelona SA (Agbar) is under the indirect control of Suez. Suez holds 25% of Agbar’s equity via Hisusa (51% Suez, 49% La Caxia) which in turn holds 47.1% of Agbar’s equity. Suez also has a direct holding of 1.7% of Agbar’s equity. Agbar dates back to the Compagnie des Eaux de Barcelone founded in 1867 and incorporated in Paris as La Societé Générale des Eaux de Barcelone, in 1891, before being incorporated in its current form in Barcelona in 1919 for the provision of water and sewerage services in Barcelona. Until 1985, Agbar along with FCC (see separate company entry for VE) enjoyed an effective duopoly of Spanish private sector water and sewerage contracts across Spain. Since then, several Spanish construction companies and electricity utilities have entered the market. Agbar, profit and loss account Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Water 585.7 747.4 794.5 840.5 892.7 Turnover 1,812.5 2,248.6 2,641.2 2,555.7 2,676.5 Operating profits 136.6 175.1 230.8 155.8 183.0 Net profit 116.4 163.5 128.8 173.4 243.0 Minority interests -15.2 -41.2 -28.1 -40.7 -48.7 Group net profit 101.1 122.3 100.7 132.7 194.3 Earnings per share (€) 0.73 0.87 0.72 0.92 1.33 Agbar holds some 60% of the private sector’s share of the water provision market in Spain. Currently municipalities hold 50% of the market, which is being steadily eroded by privatisations. Agbar serves 1,321,134 customers in Barcelona (1.4% more than in 2002), a total of 2.77million people. Agbar, unconsolidated water and sewerage revenues

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Spain 750 840 893 998 1,081 International 794 1,076 1,153 613 562 Global 1,544 1,916 2,046 1,611 1,643

Excepting Barcelona, Agbar’s water and sewerage contracts in Spain are typically due for renewal every 20 years. Currently the company provides sewerage services for nearly 14million people, of whom 10.8million have their sewage treated. Agbar, water and sewerage activities (population served)

1999 2000 2001 2002 2003 Water provision Contract retention rate 97% 93% 93% 91% 96% New contracts 220,081 338,321 169,321 212,748 145,431 Sewerage Retention rate 100% 93% 91% N/A N/A New contracts (PE) 398,000 778,417 1,535,364 2,033,261 417,406

Operating margins have consistently been higher than for the company’s other activities, with an internal rate of return of 15% for most recent contracts. Agbar expects to devote 65% of its capital expenditure on water and sewerage services in the medium term. In Agbar’s words, “the Water and Wastewater sector has been characterised by apathy, due to the scarce volume of privatisations in Spain, in line with previous years.” During the first half of 2004, Agbar was gained contracts for the management of 15 new water provision contracts in Spain serving 101,529 people, along with renewing 89% of the water contracts tendered for in the period. During this period, Agbar gained contracts for the operation of 9 wastewater treatment plants and a pollution load equivalent to 85,338 inhabitants, and the sewer system of 11 municipalities rendering service to 111,512 inhabitants. Contract renewals for 54 wastewater treatment plants with a pollution load equivalent to 938,220 inhabitants and sewerage services for nine with 132,186 inhabitants were retained, a success rate of 98%.

Acquisition of Ferrovial’s water and wastewater activities In July 2004, Ferrovial sold its water activities to Agbar for €43.3 million. These consist of 14 concessions for water and wastewater services to 250,000 people in 32 municipalities, rising to 450,000 during the summer.



Contracts for some 50,000 people were gained during 1998 and 1999 and for a further 150,000 during 2000. This business was mainly built up between 1998 and 2000 and consists of 130,000 customer accounts generating revenues of €16.3 million in 2003. The main towns served with water or wastewater by Ferroser are: Ponferrada and San Andrés del Rabanedo (Castilla-León), Estepona, Ubeda and Vélez Blanco (Andalucía), Poio and O Barco de Valdeorras (Galicia), Plá de Mallorca (Balearic Islands), Guadalemar (Extremadura), and Castañeda and Cartes (Cantabria). Four stakes were acquired during 2002 from Endesa for a total of €25.7 million: Interagua (40.0%), Emasagra (12.5%), Aguasvira (15.0%) and Aguas de Aragon (40.0%). The consolidated turnover for industrial water customers in 2000 was €16.5 million, with an aggregate figure of €53.2 million. Agbar has developed a two pronged international water contract strategy: • In partnership with Suez: Major contracts in Spanish speaking economies in Latin America. • On its own: Medium sized contracts in Latin America that are not large enough to interest Suez. This

includes the Interagua partnership for contracts in Spain and Latin America with more than 60,000 inhabitants. Interagua is now 100% held by Agbar after Endessa sold its 39.95% stake to Agbar for €16 million in 2000.

Agbar, number of people supplied in Spain and internationally Country Water Sewerage Total Spain 11,440,000 13,250,000 15,000,000 Argentina 10,900,000 7,350,000 10,900,000 Brazil 660,000 120,000 620,000 Chile 5,420,000 5,300,000 5,420,000 Colombia 1,025,000 800,000 1,025,000 Cuba 1,800,000 0 1,800,000 Mexico 650,000 650,000 650,000 Uruguay 100,000 100,000 100,000 Total outside Spain 20,216,500 14,220,000 20,216,500 Global Total 31,760,500 27,470,000 35,216,500 These figures include Aguas Argentinas, and other ventures in Latin America that also involve Suez-Lyonnaise. Agbar is currently concentrating on secondary cities in Brazil (Suez is only seeking contracts with the leading Brazilian water utilities), Ecuador, Uruguay, Chile and Mexico. According to Agbar, the company served water to 23.195million people internationally (all in Latin America) or 8,701,000 customers, along with providing sewerage services for 19,292,000 people. Outside Spain, the company operates 36 water treatment works, serving 152 population centres, along with 56 wastewater treatment works, serving 147 population centres, with a treatment capacity (in population equivalent terms) of 3,667,000. Morocco Agbar holds 5% of Lyonnaise des Eaux de Casablanca (Lydec), Suez’s Casablanca concession. Argentina In 2000, Agbar paid US$74.8 million to increase its stakes in the three concessions also managed by Suez (see the table below). Interagua (50% held by Agbar) also paid US$5 million for a stake in one company. For details of the contracts, see the separate entry for Suez. The three concessions currently serve a total of 10.9million people.

Concession company Old stake New stake Agbar Aguas Argentarias 10.8% 25% Agbar Aguas Cordobesas 11.0% 15.4% Agbar Aguas Province de Santa Fe 8.2% 11% Interagua Aguas Province de Santa Fe 12.5% 15%

The impact of the Argentinean Peso crisis meant that in December 2003 Agbar wrote off all direct and indirect investments in Argentina and constituted provisions of €216 million to cover the maximum loss that the Argentine operations might cause in the future.



Chile Agbar holds 41% of the equity of Aguas Andinas (see separate company entry). In 2004, Agbar bought 30.1% of Suez’s holding in Inversiones Aguas Metropolitanas Limitada (IAM) for €139.4 million. IAM holds 51.2% of Aguas Andinas. As a result, Agbar owns 80.1% of IAM, with Suez holding the remaining 19.9%. In 2002, Agbar’s stake was increased from 16.0% to 25.6% through the exercise of a call option at a cost of €180 million. EMOS contributed €106.9 million to Agbar’s consolidated turnover in 2000. Agbar’s Chilean activities are operated via subsidiaries of the Compania Hispano Americano de Servicios (CHAS) JV with Chilquinta SA. The Aguas Quinta concession serves 200,000 people.

1999 Santiago Privatisation of EMOS 5.1million water & sewerage Suez acquired 51.2% of Empressa Metropolitana de Obras Sanitarias (EMOS, now Aguas Andinas), Santiago’s water supply company for a total of US$1,135 million. All 44 districts of the city are to be covered, along with the long-term development of its wastewater services. Revenue growth is being driven by wastewater services expansion. Currently, 100% of the population is served with piped water and 97% by mains sewerage, while 75% of sewage effluents are treated, (see separate company entry).

2000 NE Santiago Aguas Cordillera 315,000 water & sewerage Enersis sold Aguas Cordillera to EMOS for US$193 million in June 2000.The second highest bidder was Biwater at US$179 million. Aguas Cordillera serves 88,000 customers in the Vitacura, Las Condes and Lo Barnechea districts of Santiago. 1995 Valdiva Concession 120,000 water & sewerage The concession was awarded to Aguas Décima SA. 120,000 people are served via 26,000 client contracts for water and 21,500 for sewerage. The first objective for the concession is to connect the outstanding 4,500 customers to the sewerage service. Uruguay 1997 Punta del Este 25 year concession 100,000 water & sewerage Agbar acquired 60% of Aguas de la Costa at the end of 1997. The concession also carries a 10 year optional extension from 2018. The area is principally used for tourism and ancillary services. Colombia 1995 Cartagena 25 year concession 1,025,000 water & sewerage Aguas de Cartanega SA ESP has been profitable since its onset. 44.8% of its shares are held by Agbar, 50% by Distrito Turistico y Cultura de Cartagena and 5.1% by local shareholders. Agbar’s stake cost Ptas 280 million. Agbar has invested a total of €220 million on the concession to date. In 2003 water coverage was 96% against 73% in 1995, with sewerage coverage at 75% against 61%. The aim is for 100% water coverage by 2005. Water services have been provided to 350,000 people since the concession started (93% urban poor) and sewerage services to 240,000 (90% urban poor). Aguas de Cartagena has 132,000 water customers and 102,000 sewerage customers. Brazil

2000 Campo Grande 30 year concession 660,000 water & sewerage Interagua was awarded a water and sewerage contract for Campo Grande in July 2000, which started operations in October 2000. The contract was awarded to Aguas Guariroba, a venture 50% held by Agbar, 41% by Cobel and 9% by Sanesul. Total investment will be €155.3 million. Turnover was €27.7 million in 1999. The concession currently serves 730,479 people for water and 123,536 for sewerage (17% of the population). Water meters were installed for 20,000 customers in 2001. Sewerage coverage will increase from 30% to 70% in the next five years. Cuba Interagua formed Aguas de La Habana, a JV with the Cuban Government in 1999 for two water management contracts currently serving 525,000 people, with an eventual coverage of 1,400,000 people. The contracts serve La Havana and the resorts of Cayo Coco and Varadero. Water supply systems were renovated for 298,000



people in 2001-02. In February 2000, Interagua was awarded a 25 year water management contract for approximately 1,300,000 people in Havana. Altogether these contracts serve 1,800,000 people. Mexico

2001 Saltillo 25 year concession 650,000 water & sewerage Agbar has gained 49% of Empresa Paramunicipal, the company responsible for the management of the drinking water supply and sewerage services in the city of Saltillo, in the state of Coahuila situated in northern Mexico. The remaining 51% is to be held by Sistema Municipal de Aguas de Saltillo (SIMAS). Saltillo was founded in 1577. Water is currently supplied to 98% of the population (146,245 customers), with 92% served by sewerage. Turnover was €21 million in 2001. €81.9 million is to be invested during the contract. USA In 1998, Agbar acquired 10% of Western Water Co for US$15 million (see separate company entry). Contact Details Name: Grupo Agbar

Address :

Passeig de Sant Joan 39-43, 08009 Barcelona, Spain.

Tel: +(34) 93 342 20 00 Fax: +(34) 93 342 26 70 Web: www.agbar.es Ricardo Fornesa Ribó (Chairman and CEO) Juan Rosell Lastortas (Director) Jorge Mercader Miro (Director, Vice Chairman)



AGUAS DE VALENCIA SA Aguas de Valencia SA (AgVal) was founded in 1890. Operations commenced in 1904 and in 1967 the operational mandate to supply the city of Vanencia was renewed to 2002. AgVal controls 80% of the new contract and was paid €26 million by the municipality to accept the new contract. The company was privatised in 1976 via a partial flotation. SAUR (Bouygues) is the principal shareholder with a 33.0% stake. Other significant shareholders are; Banco de Valencia (19.1%), Lubasa (9.8%), Vicente Boluda (Chairman, 11.4%) and Facsa (13.2%). While Banco de Valencia is seeking to acquire SAUR’s stake, SAUR in turn wishes to acquire Mr Boluda’s stake. The company now serves a total of 2,040,000 people with water and 700,000 with sewerage in Spain. Contract gains for 15,000 people in L’Ampolla and 15,000 for Masalfassar were made in 1994. In both cases, these were 10 year water/wastewater tenders. Further gains for a total of 60,000 people were made in 1995. The company serves 407,000 for water in Valencia and has stakes in various contracts covering 1,600,000 people in the rest of Spain. AgVal has also gained local concessions in San Jose (Costa Rica) and Escobar (Argentina, water supply for 150,000 people). Aguas de Valencia, profit and loss account Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Water supply 45.1 45.4 48.2 51.0 54.2 Group turnover 61.8 67.9 81.2 88.7 97.1 Operating profit 7.9 8.7 N/A 8.4 10.6 Net profit 4.7 5.1 8.8 29.3 5.4 Earnings per share (€) 2.80 3.05 5.23 17.41 3.21 AgVal is diversifying from the Valencia contract, gaining contracts in Spain and internationally in water provision, wastewater and waste management. Aguas de Chinas, a 50:50 JV was formed between Union Fenosa Accion Exterior (Acex) and Aguas de Valencia in July 1998. The JV seeks to bid for water contracts in China, Macao and Taiwan. Acex already has a promotion agreement with the Government of Hubei for power projects. Although AgVal aimed to see its turnover increas e to €240 million by 2003, it is evident that international contracts have not developed according to plan to date. AgVal, operational performance 2001 2002 2003 Customer connections 710,998 731,047 751,931 Water provision (million m3) 157.3 159.7 169.0 Wastewater (million m3) 111.5 109.8 119.5 Aguas de Valencia, numbers served Country Water Sewerage Total Spain 2,040,000 700,000 2,040,000 Argentina 150,000 0 150,000 Global Total 2,190,000 700,000 2,190,000 Contact Details Name: Aguas de Valencia SA Address:

Gran Via Marques del Turia 19, 46005 Valencia, Spain

Tel: +34 96 386 0507 Fax: +34 96 386 0567 Web: www.aguasdevalencia.es Vicente Boluda Fos (Chairman) Jose Manuel Calderero (First Vice Chairman) Alberto Alonso Pozas (General Director)



FCC (FOMENTO DE CONSTRUCCIONES Y CONTRATAS SA) Fomento de Construcciones Y Contratas SA (FCC) is the result of the 1992 merger between Construcciones Y Contratas SA and Formento de Obras y Construcciones SA (Focsa). Focsa was a Spanish construction company which had traditionally dominated Spain’s urban waste collection and street cleaning sectors. Focsa was founded in 1900 and gained the Barcelona sewerage contract in 1911. This contract was recently extended to 2004. FCC’s water and sewerage operations are, along with VE’s SOGESUR, the second largest in Spain after Agbar. In 2002, FCC’s water and sewerage activities, along with other urban environmental services were grouped under the Versia banner. In 1999, Alica Koplowitz sold her 28% stake in FCC to VE. While the original aim was for VE to take control of FCC, the company sold this stake for €916 million in July 2004. The stake sale does not affect the Proactiva joint venture. Fomento de Construcciones Y Contratas SA, profit and loss account

Y/E 31/12 (€million) 2000 2001 2002 2003 Turnover – services 1,629 1,579 1,606 1,709 Total turnover 4,468 5,173 5,497 6,051 Pre-tax profit 447 470 498 521 Net profit 306 476 455 496 Net attributable profit 216 241 273 309

Water revenues in Spain (Aqualia SA) were €426 million (up 10.9% on 2002) with international revenues down 33.7% at €164 million due to currency weaknesses and the termination of the Puerto Rico contract. Revenues from Latin America in 2003 were €87 million. The Services division had an order backlog of €11.4 billion at the end of 2003, €100 million lower than in 2002. FCC currently serves 9.5million people in Spain: it provides sewerage services for 7.2million people and water (as well as sewerage) services for 2.3million. Sewage treatment works (PE above 200,000)

Municipality Population equivalent Barcelona (Bogatell) 550,000 Crispijana (Vitoria) 350,000 El Copero (Seville) 550,000 Rejas (Madrid) 543,000 Sistema de Igualada 300,000 Tablada (Sevilla) 200,000 Terrassa (Barcelona) 300,000 Vilaseca Salou (Tarragona) 254,000 Viveros (Madrid) 670,000

Sewerage: O&M contracts (250,000+ people)

Municipality Population equivalent Barcelona (7 years) 1,505,000 Bilbao 354,000 Córdoba 314,000 Granada 243,000 L´Hospitalet (Barcelona, 10 years) 242,000 Madrid (Central Zone, 4 years) 2,900,000 Málaga (Cartam a, 25 years) 534,000 Sevilla (La Ranilla, 13 years) 703,000 Vigo (Pontevedra, 14 years) 287,000 Zaragoza 611,000



Water provision: 45 Spanish municipalities, serving a total of 2.53million people. Spanish contracts serving a population of more than 100,000 are as follows:

Municipality Population Contract expiry Aguas de la Loma, Jean 113,700 2026 Alcoy (Alicante) 110,500 2021 Algericas (Cadiz) 102,000 2026 Almeria 168,000 2026 Badajoz 134,710 2024 Jaen 107,200 2026 Lleida 112,207 2019 Oviedo 199,550 2046 Salamanca 158,460 2022 Vigo (Pontevedra) 290,580 2016

FCC, number of people supplied in Spain and internationally Country Water Sewerage Total Spain 7,200,000 9,500,000 9,500,000 Venezuela * 552,000 0 552,000 Colombia * 423,000 0 423,000 Argentina * 200,000 0 200,000 Mexico * 4,480,000 0 4,480,000 Portugal 244,000 0 244,000 Total 13,099,000 9,500,000 15,399,000 * Via Proactiva The Proactiva contracts are also examined in the VE entry. Venezuela 1997 Monagas 30 year concession 552,000 water A two year management contract for Hidrocapital (650,000 people) was gained in 2002. Colombia 1997 Tunja 10 year concession 120,000 water 1999 Monteria 20 year concession 263,000 water 1998 Bogota 20 year concession 2,500,000 water The Monteria concession was gained by Proactiva Medio Ambiente in December 1999 and will generate Ptas29 billion in revenues, with Ptas10.5 billion in investments over the contract life. Argentina 2000 Catamarca 30 year concession 200,000 water Proactiva was awarded the contract in April 2000 for water supply management for the departments of Capital, Vallejo Viejo and Fray Mamerto Esquiú in the province of Catamarca. Revenues over the concession will be Ptas60 billion. Capital spending will be Ptas7 billion. Contact Details Name: Formento de Construcciones Y Contratas SA Address:

Federico Salmón, 13, 28016 Madrid, Spain

Tel: +(34) 91 35 95 400 Fax: +(34) 91 34 54 923 Web: www.fcc.es Guillermo Visedo Navarro (Chairman) Rafael Montes Sánchez (Vice Chairman) Migual Jurado (Director, Aqualia)



GRUPO ACS, ACTIVIDADES ES CONSTRUCCION Y SERVICOS SA In October 2003 Grupo Dragados SA (GD) merged with ACS, Actividades de Construccion y Servidos SA (ACS) and its activities were subsumed within the enlarged group. Urbaser, the water and waste management services arm of Dragados is now the principal component of the Environmental Services section of the Services and Concessions Division. Grupo ACS, pro-forma profit and loss account

Y/E 31/12 (€million) 2002 2003 Turnover 9,962.1 10,733.6 Operating profit 576.6 649.0 Net profit 326.4 380.3 Net profit (€) 2.75 3.21

Urbaser has a number of major concessions, including the Huesnar water and sewage treatment works concession for Seville (1993) serving 220,000 people in 15 towns. The concession will generate Ptas60 billion over its 25 year life. In 1999, Urbaser gained a 30 year (extendable to 50 years) concession worth Ptas25 billion serving 150,000 people in the Spanish district of El Ferrol. The Environment division had revenues of €903 million in 2002, rising to €986 million in 2003. Grupo ACS, number of people served in Spain and internationally Water Sewerage Total Spain 2,200,000 500,000 2,200,000 Argentina 2,100,000 2,100,000 2,100,000 Total 4,300,000 2,600,000 4,300,000 Argentina 1999 Missiones Province 30 year concession 300,000 water & sewerage The Servicio de Aguas de Misiones (SAMSA) concession was awarded in August 1999 and serves the cities of Posada and Garupa involving the upgrading of water provision networks and in the longer term developing sewerage and sewage treatment facilities. Water will be supplied to the cities from the Parana River. A total investment of Ptas31.9 million is to be made over two phases, with partial funding from the World Bank for the initial phase. Revenues of Ptas120 billion will be generated over the life of the concession. 1999 Aguas del Gran BA 30 year concession 1,800,000 water & sewage GD paid US$44 million for its 27% share of Aguas del Gran Buenos Aries, in the metropolitan area of the city. Its Spanish partners are Impregilo (31%) and Aguas de Bilbao (20%) and the concession was awarded in December 1999. Revenues over the concession life will be Ptas 600 billion, with capital spending of Ptas166 billion. Contact Details Name: ACS, Actividades de Construccion y Servidos SA Address:

Avda. Pio XII, 102, 28036 Madrid, Spain

Tel: +34 91 343 92 00 Fax: +34 91 343 94 56 Web: www.grupoacs.com Florentio Perez Rodriguez (Chairman and CEO) Antonio Garcia Ferrer (Vice Chairman) Angel Garcia Altozano (Corporate General Manager) Demetrio Ullastres Llorente (Manager, Services and Concessions)



IBERDROLA SA Iberdrola SA is the Spanish electricity utility with a 41% share of the Spanish electricity distribution market and extensive power projects in North and South America. The company acquired Obrascon's Agua Ondagua in 1997, and Sercomsa in 1998. In 2000, Iberdrola acquired 75% of Pridesa, a Bilbao based water and wastewater engineering company. In July 2002, having redesigned the corporate logo to incorporate water as one of three integral symbols for the company, Iberdrola sold 75% of Pridesa and Agua Ondagua to RWE for €96 million as part of a 2000-06 strategy to concentrate on energy. It is anticipated that the Latin American concessions will be sold to third parties. Iberdrola, profit and loss account

Y/E 31/12 (€million) 1999 2000 2001 2002 2003 Turnover 6,250 7,048 8,133.4 9,594.3 9.488.0 Operating profit 1,177 1,225 1,578.8 1,564.2 1,823.0 Net profit 730.4 852.4 905.9 962.6 1,060.0

Uruguay 2000 Maldonado 30 year concession 260,000 water & sewerage The Aguas de Maldonado contract was awarded to Iberdrola (49%), Aguas de Bilbao and Banco Bilbao Bizaia in January 2000. It covers 74,000 connections in the Department of Maldonado, including the towns of Punta del Este, Malodonado, Piriapolis, Pan de Azucar and San Carlos. The consortium bid €15 million for the concession and will invest US$140 million in the project, including US$5.2 million in 2003. Revenues in dollar terms have been affected by currency weakness, falling from US$19 million in 2001 to US$12 million in 2002 and US$11 million in 2003. Chile 1999 ESSAL Acquisition 500,000 water and sewerage Iberdrola’s Iberener acquired 51% of Empresa de Servicios Sanitarios de Los Lagos SA (ESSAL) from the Chilean Government for US$94 million in 1999. The next highest bid was for US$70 million. 35% of ESSAL is now held by the government and 10% by its staff. ESSAL is one of Chile’s smaller water companies and is based in Region X in the south of the country. ESSAL serves 125,000 customers (500,000 people) in the Decima Region, which includes the cities of Osorno and Puerto Montt, with a population growth of 6% per annum. US$240 million in investments is called for, to increase the number of water connections within its operating area and to develop sewerage services and sewage treatment facilities. Currently 17% of the population has access to sewerage. The aim is for universal sewerage and sewage treatment by 2005. ESSAL had a turnover of €18.63 million in 2000. It was announced in 2002 that Iberdrola was considering selling ESSAL, but no further developments have taken place. Iberdrola, number of people served internationally

Water Sewerage Total Chile 500,000 100,000 500,000 Uruguay 260,000 260,000 260,000 Total 760,000 360,000 760,000

Contact Details Name: Iberdrola SA Address:

Gardoqui 8, 48008 Bilbao, Spain

Tel: +34 94 479 14 11 Fax: +34 94 479 01 93 Web: www.iberdrola.es Inigo de Oriol Ybarra (Chairman) Jose Ignacio Sanchez Galán (Vice Chairman) Julian Martinez Simancas (CEO) Jose Miguel Martinez Urquijo (Director, Non-Energy Activities)



OHL OHL is a Spanish construction company which was formed as a result of the mergers of Obrascon and Huarte in 1997, along with Construcciones Lain in 1999. In 2001, OHL acquired Inima a company specialising in water and waste management engineering that has also developed a number of BOT water and wastewater concession contracts for municipal customers.

Y/E 31/12 (€ million) 2002 2003 Turnover – services 231.8 239.4 Total turnover 1,772.0 2,111.8 Operating profit 73.5 143.0 Net profit 42.1 48.5 EPS (€) 0.47 0.54

Inima Servicos Europeos de Medio Ambiente SA had revenues of €79.3 million in 2003, with a long term order backlog of €1,129.8 million. In 2003, the company decided to sell its water treatment activities along with waste management and environmental consulting in order to concentrate on wastewater treatment and desalination engineering and concessions. Water and wastewater concessions generated revenues of €35 million in 2003. At the time, Inima served some 1.6million people. Spain 2000 Trapiche 20 year BOT 300,000 water The €20 million EM SER Trapiche plant treats 146,880m 3 of water per day, serving the Axarquia district of Malaga. Inima is currently selling this concession. 1996 Cadiz 30 year concession 350,000 wastewater treatment A 24 year concession after the facility entered service in 1997. The AIE Cadiz-San Fernando facility treats 75,000m 3 of wastewater per day, serving Cadiz and San Fernando. Brazil 2003 Robeirao Petro 16 year concession Wastewater treatment The two wastewater treatment plants were built by OHL and are to be operated by Inima until 2019. The concession company Ambient (Servicos Ambientais de Riberao Petro SA). Inima holds 74% of the concession, which involves a total investment of €35 million. Desalination concessions Chile Antofagasta Desalant 20 year BOT, 2003-23 Chile Arica Desalinizadora Arica 10 year BOT, 1998-08 Mexico Los Cabos Promoaqua Desalacion de LC 20 year BOT, 2003-23 Spain Churriana de la Vega Inima 24 year BOT, 123,000m 3/day USA Brockton, MA Aquaria Water LLC 20 year BOT, 2005, 22,500m 3/day The Antofagasta plant is to cost US$54 million and currently provides 13,000m 3 of water per day, which will be expanded to 52,000m 3 per day by 2010. It will provide 70% of the city of 300,000s water needs. Contact Details Name: OHL SA Address: Gobelas, No 35-37 El Planto, 28023

Madrid, Spain Tel: +34 91 348 41 00 Fax: +34 91 348 44 63 Web: www.ohl.es

www.inima.com Juan-Miguel Villar Mir (Chairman) Jose Luis Garcia-Villalba Gonzalez (Deputy Chairman) Juan-Miguel Folquie Usan (Managing Director)



TECNICAS VALENCIANAS DEL AGUA Technicas Valencianas Del Agua (Tecvasa) is a privately held venture company specialising in tendering for water projects. It is held by Anton Trust SL, Inversiones Americanas del Agua, SA Caja de Ahorros del Mediterráneo (G.I. CARTERA) SA, Red Control SL, Comercial Virosque SL (COMVIR), Válvulas Arco SL and G.T. Inversiones y Cartera 2001, SL. The venture was formed in 1999 and has stated that it currently serves a total of 8.5million people in Latin America. Tecvasa entered the Latin American market by forming an alliance with Colombia’s Triple A. Tecvasa holds 49% of the Lassa JV (Sociedad Latinoamerica de Aguas y Servicos) and 49% of AAAS Servicos, the water operations division of Triple A (La Sociedad de Acquducto, Alcantarillado y Aseo de Barranquilla SA). The company is actively seeking contracts in Panama (LASSA, Latinoamericana De Aguas Y Servicios S.A.) and Chile (in association with Mendes Júnior y Asociados Chile SA). Triple A has revenues of US$74 million and net profits of US$9 million in 2001. Technicas Valencianas Del Agua, number of people served

Water Sewerage Total Colombia 1,770,000 1,770,000 1,770,000 Dominican Republic 3,100,000 0 3,100,000 Ecuador 100,000 100,000 100,000 Venezuela 3,500,000 3,500,000 3,500,000 Total 8,470,000 5,370,000 8,470,000

Colombia 1997 Santa Marta 20 year concession 400,000 water & sewerage 2001 Soledad 20 year concession 400,000, water & sewerage 1996 Barranquila 37 year concession 1,370,000 urban services The Santa Marta district concession (Metroagua SA) covers bulk water provision, sewerage and waste management services. Barranquila (AAA Servicos SA) is the fourth largest city in Colombia. The concession encompasses domestic refuse collection (390,000 tonnes pa) as well as water provision and sewerage services. Water and sewerage coverage are to rise from 93% and 74% respectively to 99% and 96% during the concession’s life. Until 1999, Agbar had a 43% holding in the concession company for these contracts. Agbar sold its stakes to Tecvasa and Triple A after disputes over water tariffs. The Soledad concession involves US$37 million in capital spending on a network with 75% water and 65% sewerage coverage. Dominican Republic AAA Dominicana SA has an O&M contract serving the western half of the city of Santo Domingo. Ecuador Aguas de Samborondón (Amagua CEM) provides water and sewerage services to the city of Samborondón in Guayas province. Venezuela 2001 Zulia O&M 3.5million water Tecnicas Valencianas del Agua and Colombia’s Triple A gained an O&M contract for the state of Zulia, including Hirdolago de Maracaibo, serving Maracaibo Venezuela’s second largest city. A total of 21 municipalities will be served, covering a population of 3.5million people. The contract is worth US$75 million. Contact Details Name: Technicas Valencianas Del Agua (Tecvasa) Address: C/Espinosa, 8 - 3ª planta,

46008 Valencia, Spain

Tel: +34 96 315.32.32 Fax: +34 96 315.35.18 Web: www.tecvasa.es

www.aaa.com.co

THAILAND PART 3: COMPANY ANALYSIS


THAILAND EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED The Eastern Water Resources Development and Management Public Company Limited (EASTW) was set up in 1992 as the sole supplier of water to the eastern seaboard of Thailand. The company was wholly owned by the Provincial Waterworks Authority of Thailand (PWA). In 1997, after an increase in its capital, it was partly floated on the Stock Exchange of Thailand. EASTW is developing water supply services to the provinces of Chonburi, Sakaew, Rayong, Chachengsao, Chanthaburi and Prachinburi, all located in the most industrialised area of Thailand. Currently the water infrastructure in these provinces is unable to meet the demands of industrialisation. 44% of the company’s shares are held by the Provincial Waterworks Authority, 20% by Electricity Generating Plc and 5% by the Industrial Estate Authority of Thailand. There is a 30% limit on overseas holdings in the company. Diversification to date is at an early stage. Global Water Systems Corporation Ltd (GWS) has installed water vending machines at 200 locations in central and suburban Bangkok. GWS produces potable water vending machines. In 2001, GWS received the copyright to produce and sell the mobile vending machine units. The mobile units are required by organisations where either clean water consumption is needed, or where the facility of water distribution is needed. It is initially targeted to supply 5 mobile units. The Universal Utilities Company Limited (UUC) is developing BOT and O&M contracts in other districts of Thailand. UUC has gained five contracts to date. Each of the three 25 year BOT contracts started in March 2001. They involve managing the water treatment works and distribution system, reducing water losses and increasing water production capacity over the concession’s life: • Chachoengsao Water Supply Company Limited (CWS, 99% held by EASTW) supplies 20,000m 3 of

drinking water per day to the Chachoengsao Waterworks Office in Chacheongsao.

• The Bangpakong Water Supply Company Limited (BWS, 99% held) supplies 13,000m3 of drinking water per day to the Bangpakong Waterworks Office in Chacheongsao.

• The Nakornsawan Water Supply Company Limited (NWS, 84% held) supplies 4,000m 3 of drinking water per day to the Nakorn Sawan Ork Waterworks Office in Nokornsawan.

• The 10 year O&M contract for Sattahip Waterworks was awarded to UUC by the Provincial Waterworks Authority in 2000. It has a 12,000m³ per day. Under the contract, UUC is to expand the water distribution network (in Thailand) and has installed a Bht14.5 million Supervisory Control and Data Acquisition (SCADA) and Geographic Information System (GIS).

• A 15 year BOT for the Si Chang municipality’s waterworks was signed in August 2000. The Bht55 million reverse osmosis desalination plant produces 500m3 of water per day.

UUC has constructed a reverse osmosis desalination system to produce and distribute tap water to consumers on Si-Chang Island. This entered service in 2002 at a cost of Bht52 million with a production capacity of 1,000m3 per day. The Si-Chang municipality purchases water from UCC at the water production site and distributes to houses through the pipeline which will accommodate the water demand of Si-Chang inhabitants for 10 years. Wastewater management is at an earlier stage, with an O&M contract for the Hadyai Municipal Wastewater Treatment Plant. EASTW, profit and loss account

Y/E 30/09 (Bht million) 1999 2000 2001 2002 2003 Water provision 556.3 736.0 885.1 1,089.1 1,235.8 Pipeline installation 0.0 0.0 38.4 7.3 114.1 Vending machines 1.0 0.9 0.2 0.0 0.0 Group turnover 557.3 736.9 923.5 1,096.4 1,349.9 Operating profits 321.4 404.7 485.8 545.8 590.4 Net income 283.1 229.8 278.8 325.8 352.5 Earnings per share (THB) 2.78 2.30 2.79 3.26 3.53

Million m3 pa 1999 2000 2001 2002 2003 Water distribution 95 104 116 140 157 Water production capacity 263 263 263 328 328

THAILAND PART 3: COMPANY ANALYSIS


Revenues by customer type (%)

Y/E 30/09 2002 2003 Raw Water 77% 86% Service Income 1% 8% Tap Water 6% 9% Drinking Water 2% 1% Other Income 5% 5%

Current tariffs are Bht6 per m3 for domestic and commercial use and Bht9 per m3 for industrial use. In July 1999, EASTW raised Bht2.5 billion through a bond issue to fund expansion into non-regulated activities and to upgrade the distribution network. EASTW anticipates spending more than Bht3.4 billion on completing its water distribution network in Rayong, Prachinburi and Chachoengsao provinces. In 2000, Electricity Generating Pcl (Egco) sold a 15% stake in Egcom Tara to East Water for US$2.1 million. Egco is the leading Thai private sector power generation company. In July 1999, Egco acquired 70% of Egcom Tara from Require Construction Co for Bht398 million (US$11 million). Egcom Tara has a 30 year Bht690 million BOT contract for water supply in Ratchaburi and Samut Songham provinces. EASTW has set up a partnership with VE and Aquathai Co of Thailand to bid for a Bht800 million water supply BOT for the central area of Lampang province. This consortium was the only group to pass PWA screening for the contract. East Water is currently negotiating with Egcom to acquire a majority stake in the venture. EASTW is currently spending Bht2 billion (US$44.5 million) to expand its drinking water provision activities; first through Egcom Tara, where it plans to increase its stake and also through spending Bht1 billion in a reservoir and pipeline project in Chachoengsao province to increase its water capacity from 160 to 240m3 pa. In June 2003, EASTW announced that it will invest Bht4.2 billion (US$101 million) on three water supply projects to factories in Bangkok (Bht800 mill ion) and Nakhon Ratchasima (Bht2.0 billion) and Prachin Buri (Bht1.4 billion) provinces. A further Bht3 billion (US$73 million) was raised in 2004 to build a second pipeline in Rayong, 200km east of Bangkok, which will enter service in 2007, delivering 50million m3 pa. Contact Details Name: Eastern Water Resources

Development & Management Public Company Limited Address: 9/9 Vibhavadi Rangsit Road,

Laksi, Bangkok, 10210 Thailand

Tel: +66 2 940 9974-6 Fax: +66 2 561 3793 Web: www.eastwater.co.th Sujarit Patchimnum (Chairman) Wanchai Lawatanarakul (President and CEO) Wanchai Ghooprasert (Vice President)

UNITED KINGDOM PART 3: COMPANY ANALYSIS


UNITED KINGDOM AWG PLC AWG is the holding company for Anglian Water Services and a num ber of infrastructure related activities. Following the acquisition of Morrison Plc in 2000, the company was re-branded as AWG Plc. Since 2003, AWG has been rationalising its activities as a result of problems associated with both its international operations and with the Morrison activities, resulting in exceptional write-downs of £450 million. Regulated activities: Anglian Water Services Anglian Water Services Limited serves some 5.7million people in eastern England. The Anglian region is characterised by low rainfall (which will be exacerbated in the longer term by climate change), population growth and development, especially when related to information technology. At the same time, the region’s emphasis towards industrial agriculture, allied with slow flowing waterways makes the region vulnerable to environmental degradation. As a result, AWG has concentrated on delivering a high service quality, through a well developed infrastructure, with an emphasis on environmental compliance. The company manages demand via a twin-track approach; the widespread use of domestic metering and low leakage rates. The high cost of water encourages the widespread use of domestic metering and makes it feasible to have notably low leakage rates which have reduced significantly since privatisation. The company is also seeking to develop ways of recycling grey water (e.g. bath water) for domestic applications such as flushing lavatories and use of grey water in the garden. Distribution losses of 5 m3 per km of pipes compares with an industry average of 11, along with metering in 54% of AWG’s domestic base is now covered against 12% across England and Wales as a whole. In addition, 85% of the distribution network is covered by district metering for measuring leakage at all points along the network. In 1998 AWG acquired Hartlepool Water Plc, a SWC. Since then, Hartlepool has gained two inset appointments in northern England within the territory served by Northumbrian Water Group Plc. The non-regulated activities have been aligned into five groups under Infrastructure Management Business: • Utility Services (infrastructure maintenance, renewals, new-build and specialist services to the gas,

water, telecommunications and electricity sectors), with £99 million in water revenues for 2003-04 • Government Services (PPP projects and provides specialist technical and facilities management

solutions to the public sector, including eleven PFI concessions, one for the Moray WWTW) • Project Management Services (designs, manages, constructs and maintains client assets through both

one-off and long-term framework contracts) • Developments and Commercial Services (Commercial and residential property developer) • International Services (Anglian Water International, Morrison International and PURAC International) Anglian Water Services (AWS) has been ‘ring fenced’ and re-financed. Ring fencing has enabled the capital structure of the business to be changed with AWS now being largely debt financed through a £1.76 billion asset backed bond issue. The £128 million cost of this refinancing means that it will take five years for the lower cost of debt to benefit the company. In addition, £678 million was returned to shareholders in 2002 and 2003. AWG Plc, profit and loss account

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Turnover UK water and wastewater 735.5 696.6 724.4 726.8 766.6 Utility Services N/A 98.3 227.3 278.6 280.1 Government Services N/A 47.7 71.2 119.9 219.8 Construction Services N/A 155.0 353.8 391.8 385.8 Development and Commercial Services N/A 99.1 219.5 181.2 143.9 International Services N/A 195.6 212.6 209.5 117.9 Operating profit UK water and wastewater 398.8 270.9 305.4 287.4 318.9 Utility Services N/A 6.4 12.1 10.2 8.2 Government Services N/A 6.1 6.5 10.0 14.8 Construction Services N/A 0.7 4.3 -0.6 -7.1 Development and Commercial Services N/A 14.0 15.4 2.1 4.8 International Services N/A 16.0 15.2 26.2 14.0 Gross turnover 872.9 1,230.9 1,813.1 1,882.8 1,889.0 JVs 5.6 57.0 108.5 142.8 129.4 Group turnover 867.3 1,173.9 1,704.6 1,740.0 1,759.6 Operating profit 301.5 312.9 321.7 318.4 331.5 Sale of assets 16.4 -2.7 19.6 -1.2 -121.5 Exceptional items N/A -25,5 -194.1 -77.2 -36.2



Net interest -114.0 -159.1 -195.1 -289.9 -267.3 Pre-tax profit 203.9 125.6 -53.5 -42.4 -79.8 Tax charge -38.0 -26.3 16.3 -9.7 8.5 Post-tax profit 164.5 99.3 -37.2 -52.1 -71.3 Earnings per Share (p) 60.5 33.5 -16.3 -26.4 -52.0 Dividends per Share (p) 43.0 44.0 44.6 46.0 47.2

Anglian Water International Ltd.

Anglian Water International and Anglian Water Processes (AWP) were merged in 1996 to form a combined AWI. Process engineering is conducted through the Purac group of companies with offices in the UK (Kidderminster), Sweden, Norway, Germany and Poland. During 40 years in business, Purac has been responsible for over 3,000 water and wastewater plants in 54 different countries, with water treatment plants serving 40million people in China. Since 2003, the company has sought to sell off its international water concessions. To date its activities in Scotland, Chile, the Philippines, Sweden, Vietnam and the Czech Republic have been sold. These sales have raised £106 million and have entailed exceptional losses of £120 million. AWG, number of people served in the UK and internationally

Country Water Sewerage Total UK- Anglian Water Services 3,983,000 5,700,000 5,700,000 UK - Hartlepool Water 92,000 0 92,000 New Zealand 0 300,000 300,000 Norway 0 250,000 250,000 Ireland 50,000 1,200,000 1,250,000 Brazil 0 100,000 100,000 Australia 0 130,000 130,000 Peoples Republic of China 3,760,000 0 3,760,000 Total - home market 4,075,000 5,700,000 5,792,000 Total - international 3,810,000 1,980,000 5,790,000 Grand total 7,885,000 7,680,000 11,582,000

Norway

2000 Oslo 13 year concession 250,000 sewerage Purac was awarded a £40 million design and build contract with Kaldnes and Selmer for the Bekkelaget sewage treatment works serving Oslo in 1998 with a PE of 350,000. The first phase entered into operation in 1999, with completion due in 2001. In October 2000, AWI was awarded a 13 year operating concession for the facility with an optional five year extension period. The 13 year contract is worth £100 million. Ireland

2000 Dublin 20 year BOT 1,200,000 sewerage Ascon, an Irish construction company, Binnie Black & Veatch and AWG Water are to build Ireland’s largest STW, serving the city of Dublin and surrounding areas in a contract worth £185 million including £120 million of construction work. This has been expanded to serve a total of 1.6million PE , includes advanced treatment and is now operated by AWI, with its Celtic Anglian Water JV managing the sewage sludges. In addition this JV won a £20 million four year contract in 1998 to tackle leakage in the Dublin area for a population of 1.5million.

2002 Sligo 10 year O&M 50,000 water In 2002, AWG gained a contract to operate a new water treatment works on behalf of Sligo County Council. The 10 year, £5 million contract is to deliver 11million L of water per day to the Sligo area. Brazil AWI has been evaluating projects in Central and South America, especially since 1996. AWI is in the process of working with the Global Environmental Fund to establish Brazilian Water Works to pursue projects in Brazil. In southern Brazil, AWI set up Cejen-Anglian (37.5% held) in 1994, a JV with Fidem, owning and operating a deep shaft industrial effluent treatment work in the city of Brusque with a population equivalent capacity of 300,000. The facility serves approximately 200,000 people. Problems relating to the contract meant that a £7 million write down of assets/development costs was made in 1996/97. Nevertheless, the BOOT facility has been operational since 1996.



Australia

2000 Brisbane DBO 60,000 sewage treatment Redcliffe (Brisbane) is a 15 year DBO, which came under control of the group in January 2000. The capital expenditure is about A$15 million and the operating expenditure is about A$1 million pa. The plant is designed to handle 16Ml/day (60,000) and has two effluent quality levels. The first one (N-8mg/L and P-3mg/L) is to be effective from completion of the facility. The second (N-5mg/L and p-1mg/L) is scheduled to come in 2005. Biosolids are to go to re-use as part of a mine rehabilitation scheme.

2001 Wodonga 11.5 year DBO 70,000 sewage treatment In December 2001, AWI signed a 11.5 year DBO contract with North East Water for a 70,000 population wastewater treatment plant at West Wodonga on the Murray River. New Zealand

1994 Wellington 25 year DBO 300,000 sewerage Two sewage treatment works have been constructed at a total cost of £50 million, along with a sludge de-watering plant and a 1.8km long sea outfall at Moa Point. The construction phase ended in 1998, with the contract now into its 21 year operational phase. The facility has now entered service, with a 21 year operating contract. The operator, Anglian Water International (NZ) Ltd. is 100% held by AWI. This was won in March 1995 against VE, Suez and UU. AWG won this contract because of its Kaldnes technology. The Kaldnes process involves placing millions of small, hollow, plastic, pasta-shaped pieces into the sewage to be treated, and because of the huge surface area created on the pieces, the actual footprint size of the treatment works can be dramatically reduced cutting costs and environmental intrusion. This small footprint requirement was a key specification in the contract. China 2000 Hexian 20 year JV, operate 630,000 water

AWG has approximately 30 water construction projects, but this is the company’s first operating contract, which is to be run jointly with the Hexian Water Company. Hexian is in Anhui Province and the city’s water treatment facility is currently unable to produce potable water. On completion, the plant will be used to provide water to the surrounding area in addition to Hexian. 2001 Beijing 3 year build and 20 year BOT 2.5million water treatment The US$200 million facility will treat 500 million L per day and is the largest water treatment project awarded to the private sector during 2001. A further US$50-100 million in capital expenditure will be needed for related infrastructure. AWG bid with Mitsubishi of Japan, who have access to funds from the Japan Bank for International Co-operation. 2002 Tiazhou 16 year O&M 630,000 water

Contract signed with Tiazhou Municipal Water Company in Jiangsu Province in May 2002. Investment will total £4.4 million in equity and £11.2 million in local debt. The contract is for bulk water provision under a take or pay agreement, whereby a guaranteed volume of water is to be purchased, generating a turnover of £70 million for the life of the contract. Contact Details Name: AWG plc Address: Anglian House, Ambury Road,

Huntingdon, Cambridgeshire, PE29 3NZ, UK

Tel: +44 1480 323 000 Fax: +44 1480 323 115 Web: www.anglianwater.co.uk Web: www.awg.com Peter Hickson (Non-executive Chairman) Johnson Cox (CEO) David Tydeman (COO) Scott Longhurst (Group Finance Director)



BIWATER PLC/CASCAL NV Biwater was founded in 1968, providing water purification hardware to swimming pools. During the 1970s, Biwater moved into sewerage hardware and developed a number of export markets. In 1986, Biwater gained a major 5 year O&M contract following a US$ 1 billion construction contract with the Malaysian Rural Water Supply Scheme. In 1989 they acquired Bournemouth & West Hampshire Water Plc. Biwater is a privately owned company, specialising in water treatment and sewerage engineering. Biwater became a Plc in 1997 and Biwater Capital Plc was set up in 1998 for international concession contracts. The company has been seeking bids in most of the currently active international markets, with a balance between wastewater and water provision. Biwater has also been bidding in central and eastern Europe, and in Bartoszoye (North Poland), Calafat (Romania) and Haskovo (Bulgaria) it has gained contracts for constructing wastewater treatment works. Other construction and management contracts have been gained in Nigeria (Guinness), and in five Central American countries. In March 2000, Nuon of the Netherlands acquired a 50% stake in Biwater Capital BV, now rebranded as Cascal. Cascal is the operations and investments arm of Biwater Plc. Nuon paid US$ 130 million for its holding in the joint venture (see separate company entry.) Cascal BV, profit and loss account

YE 31/03 (US$ million) 2001 2002 2003 2004 Water supply turnover 53.8 61.4 69.0 80.5 Water contracting turnover 11.1 11.2 8.1 7.1 Group turnover 64.9 72.6 77.1 87.6 Operating profit 10.2 13.0 15.4 22.9 Pre-tax profit 10.3 9.5 11.0 20.1

Cascal, number of people served internationally

Country Water Sewerage Total Indonesia 690,000 0 690,000 UK 500,000 0 500,000 Chile 9,000 419,000 419,000 Philippines 370,000 370,000 370,000 South Africa 360,000 0 360,000 Belize 150,000 0 150,000 Mexico 0 80,000 80,000 Kazakhstan 30,000 20,000 30,000 Grand Total 2,109,000 889,000 2,599,000

UK Biwater was the first company to acquire a SWC, East Worcester Water, in 1988. This was sold to Severn Trent in 1992. Bournemouth Water (founded in 1863) and West Hampshire Water (founded in 1893) were both acquired in 1989 and merged in 1993. The company has 190,900 connections, serving 424,000 people, rising to 500,000 in the summer. These activities have formed the backbone of Biwater's profitability in recent years. Capital spending for 2000-05 will be £45.6 million against £44.8 million in 1995-00. This contract is 100% held by Cascal and will run in perpetuity, subject to 10 years notice of termination.

YE 31/03 (£ million) 2003 2004 Water supply turnover 27.17 28.41 Non-regulated turnover 1.95 2.31 Group turnover 29.11 30.70 Operating profit 9.37 9.42 Pre-tax profit 8.31 8.65

Philippines

1996 Subic Bay 25 year concession 370,000 water & sewerage The Subic Water and Sewerage Company is a JV with local partners, serving Subic Bay Freeport and Olongapo City. The contract involves capital spending of US$150 million in the first 10 years, with US$250 million over the concession's life.



Indonesia

1995 Batam Island 25 year concession 650,000 water provision Cascal has a controlling interest with local partners (Cascal 50% and PT Bangun Cipta Contractors 50%). Batam Island industrial zone is 2 miles from Singapore. The concession involves US$100 million of capex in the first 10 years and US$200 million over the concession's life (Rp37.5 billion). Leakage has been reduced from 49% to 25%. Water demand grew by 10% in 2002-03, with 69,000 customer connections. In 2003-04, connections rose by a further 18% to 81,000.

2000 Talang Kelapa 20 year concession 40,000 water provision Talang Kelapa is situated to the north of Palembang. The aim is to provide potable water for up to 200,000 people, as well as industrial users, in an area characterised by water shortage. The concession is being operated with two local partners. Chile

1994 Santiago Concessions 9,000 water & wastewater Biwater has acquired several small companies outside Santiago, with concessions serving medium to high quality residential and industrial areas in the North and East of the city. These are grouped together as Aguas Santiago SA. A water treatment works for the Pan de Azucar concession area is being constructed during 2004. The company seeks to buy one or more of the water utilities currently being sold off, and owns US$50 million in water rights.

1994 Antofagasta 30 year concession 260,000 sewage treatment This is the first privatised WWTW in Chile. The Antofagasta facility serves one of the driest parts of the world, with only 3.3mm of rainfall pa. The facility handles a population of 300,000 and recycles the water, selling it on to industry, farms and households.

2000 Calama 20 year concession 150,000 sewage treatment The concession has been modelled on the Antofagasta contract. Cascal has carried out complete refurbishment of the existing treatment plant, which is owned by ESSAN (a local utility). The 7.9million m3 pa facility entered service in October 2002.

2001 Noranda 15 years Industry This project provides 3.9million m3 pa of treated wastewater to industry in La Negra, Chile, some 35km from Antofagasta. Kazakhstan

1998 Karasai 5 year O&M 30,000 water & sewerage Cascal provides water and sewerage services to Karasai, on the outskirts of Almaty. There has been a major improvement of the service, with water provision going from 4–6 hours per day to a 24-hour service. Billing was only introduced once the service was seen to have improved. A 25% collection rate has been improved to 90% following the improvement in service. Cascal has an option to buy the water supply company. Mexico

1993 Puerto Vallarta 15 year BOOT 80,000 sewerage The first sewerage BOOT in Mexico, with a WWTW to secondary standard that entered service in 1995. This has enabled Puerto Vallarta to develop into a major international holiday resort. It has a production capacity of 216Ml per day. Belize

2001 Belize City In perpetuity 150,000 water and sewerage Cascal took over the running of Belize Water Services after winning an international bid. Cascal have already reduced non-revenue water (by 11% during 2003), optimised the bulk transfer of water by utilising dedicated pipelines at low pressure, increased public relations and upgraded the offices. Turnover increased by 21% in 2003.



South Africa

1999 Nelspruit 30 year concession 360,000, water provision The 300million Rand concession covers the Maputo Development Corridor in Mpumalanga Province, the fastest growing municipality in the country. This is the first full privatisation in South Africa. Biwater is to take over billing and revenue collection while modernising the facilities. Cascal has focused the concession on improving and expanding service delivery to townships. UFW fell from 23% to 16% from 2001-2003. Tanzania 2003 Dar es Salaam 10 years, lease 3million water & sewerage Finance is coming from the African Development Bank (US$ 48 million), the European Development Bank (US$37 million), Cascal and HP Grauff (US$8.5 million), DAWASA (US$12.5 million) and the World Bank (US$55million). The project will concentrate on reducing UFW, refurbishing water and sewerage systems, upgrading billing and metering and making DAWASA self financing. Cascal bid US$0.34 per m 3 as the base tariff. Contact Details Name: Cascal BV Address: Biwater Hous e, Station Approach,

Dorking, Surrey RH4 1TZ Tel: 01306 746080 Fax: 01306 746031 Web: www.cascal.co.uk Stephane Richer (Chief Executive Officer) Cees Zonneveld (Chief Financial Officer) Paul Gledhill (Chief Operations Officer) Contact Details Name: Biwater Plc Address: Biwater House, Station Approach,

Dorking, Surrey RH4 1TZ Tel: 01306 740740 Fax: 01306 885233 Web: www.biwater.com Web: www.bwhwater.com David White (Chairman) Larry Magor (Chief Executive Officer) Mike Coombs (Finance Director)



BOC GROUP PLC The BOC Group Plc (BOC) specialise in the manufacture and distribution of gasses for industrial and Government customers. In 2001, Air Liquide (France) and Air Products (USA) made a joint hostile bid for BOC, which subsequently lapsed. BOC’s Process Gas Solutions is being developed to offer a range of services to industrial clients. The division accounted for 30% of BOC’s 2002 turnover and 37% of its operating profit. BOC Group Plc, profit and loss account

YE 30/09 (£million) 2001 2002 2003 Group turnover 3,772.9 3,657.7 3,718.3 Operating Profits 422.3 425.6 438.6 Pre-tax profit 362.2 335.3 351.9 Net profit 224.1 202.9 219.1 Earnings per share (p) 46.0 41.4 44.5

In October 2002, BOC acquired Environmental Management Corp, a privately held St. Louis -based water services company, for US$50 million, with a further US$10 million payable if certain performance conditions are met over five years. Environmental Management Corp, which had revenues of some $40 million in 2001, manages water and wastewater treatment facilities for both industrial and local municipal customers around the US. BOC Process Gas Solutions aims to expand EMC’s client base through its established relationships in the industrial sector. EMC serves municipal clients with populations ranging from 5,000 to around 200,000. EMC, main water and wastewater treatment O&M contracts

Brighton, Il 0.55 MGD wastewater treatment plant Lichfield, Il 1.72 MGD wastewater treatment plant Godfrey, Il 2.2 MGD wastewater Plant Monmouth, Il 4.2 MGD wastewater plant Mount Vernon, Il 5.0 MGD wastewater plant Oregon, Il 0.625 MGD wastewater plant Pittsfield, Il 1.5 MGD wastewater plant Evansville, Il East – 18.0 MGD wastewater plant Evansville, Il West – 20.6 MGD wastewater plant Jeffersonville, Il 5.2 MGD wastewater plant Sellersburg, IN 1.5 MGD wastewater plant Sellersburg, IN 2.5 MGD water treatment plant St Charles, MO Missouri – 5.0 MGD wastewater plant St Charles, MO Mississippi – 5.5 MGD wastewater plant (being expanded to 7.9 MGD) Seymour, IN 4.3 MGD wastewater plant Vincennes, IN 4.56 MGD wastewater plant

Contact Details Name: BOC Group Plc Address: Chertsy Road, Windlesham,

Surrey GU 20 6HJ Tel: +44 1276 477 222 Fax: +44 1276 471 333 Web: www.boc.com Rob Margetts (Chairman) Tony Issac (CEO) Rene Medori (Group Finance Director Dick Grant (CEO, Process Gas Solutions) Contact Details Name: EMC Address: 1001 Boardwalk Springs Place,

O'Fallon, MO 63366 Web: www.emcinc.com



BRISTOL WATER HOLDINGS PLC The Bristol Waterworks Company (Bristol Water) was founded in 1846. Bristol Water supplies water to 1,066,000 people in the city of Bristol in western England and certain surrounding areas. Sewerage services are carried out by Wessex Water (YTL). Vivendi Environnement’s 24.7% holding was sold to the Ecofin Water & Power Opportunities Fund Plc in 2002 for £38 million. In April 2001, Bristol Water and Wessex Water set up a JV to combine their customer services and billing operations. Bristol Water Plc is 100% held by Bristol water Holdings Plc, which operates the company’s non-regulated activities. In 2000, the non-regulated activities were grouped into Verdan Group Limited, consisting of Lawrence (pipeline contracting), Elementa Facilities Maintenance (heating, ventilation and air-conditioning in commercial and public buildings), Bristol Water Consultancy Services (leakage reduction and the management of drinking water systems), Operational (energy and environmental services to the food, pharmaceutical, printing and packaging industries) and Purton Carbons (JV with Norit for the reactivation of granular activated carbon). Bristol Water exited from its Malaysian water management joint venture in 2004 and made a profit of £0.4 million on the arrangement. The company is now concentrating on North America where it has set up Water Systems Optimization, Inc. for pipeline management and leakage reduction contracts. A number of preliminary contracts have been gained. Bristol Water Holdings, profit and loss account

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Bristol Water Plc 69.45 64.84 68.01 69.97 70.67 Other activities 17.77 41.17 68.00 50.86 50.78 Group turnover 87.22 106.01 136.02 120.84 121.45 Operating profit 18.15 14.10 19.02 20.41 20.03 Pre-tax profit 12.89 10.44 15.58 16.09 14.53 Earnings per share (p) 25.0 29.4 55.7 43.2 52.2

In December 2003 Bristol Water announced a refinancing to increase in the level of borrowings in the regulated water business and a return of £51 million to shareholders. The company has set up a consortium with AWG as British Waterways’ partner for Watergrid, which will mobilise BW’s 2,000 mile canal based water distribution system holding up to 200,000MI per day for commercial and industrial customers. Bristol Water Holdings plc has a 22.5% stake in the new venture. Contact Details Name: Bristol Water Holdings Plc Address: PO Box 218, Bridgewater Road,

Bristol, BS99 7AU, UK.

Tel: +44 117 966 5881 Fax: +44 117 963 4567 Web: www.bristolwater.co.uk John Moger Woolley (Chairman) Alan Parsons (CEO) Roger Wyatt (MD) Andrew Nield (Finance Director)



DEE VALLEY GROUP PLC The Dee Valley Group supplies water to Wrexham and parts of Clwyd in North Wales and Chester and parts of Cheshire in North West England, with sewerage services being provided by Dwr Cymru (Glas Cymru) and North West Water (United Utilities Plc). Dee Valley Group was formed from the merger of the Wrexham Water and Chester Waterworks companies in 1994. 41% of the company’s shares are held by two institutional investors. Distribution losses in 1999/00 were 12.5Ml/day against Ofwat’s target of 11.8Ml/day and the company is on target to reduce this further to 10.9Ml/day by 2004/05. The company diversified into gas supply (North Wales Energy) and pipeline maintenance (DVS Pipelines) along with an alliance with Norweb (United Utilities Plc) for marketing electricity distribution within the Dee Valley franchise area. In 2001, the company sold its energy businesses to Scottish and Southern Energy plc. The pipeline activities not directly connected with Dee Valley’s operations were sold in 2002 and Dee Valley now concentrates on water supply services. Following a £32 million refinancing in 2003, the B shares have been redeemed. Dee Valley Group Plc, profit and loss account

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Water turnover 18.05 16.41 16.57 16.47 16.66 Other turnover 4.23 11.83 10.88 1.90 0.00 Group turnover 22.28 28.24 27.45 18.37 16.66 Operating profit 9.41 6.52 6.67 5.41 6.47 Net profit 7.87 1.69 2.22 3.06 4.33 Earnings per share (p) 56.9 12.2 48.0 79.7 66.5

Contact Details Name: Dee Valley Group Plc Address: Packsaddle, Wrexham Road,

Rhostyllen, Wrexham, Clwyd, LL14 4EH, UK

Tel: +44 1978 846 946 Fax: +44 1978 846 888 Web: www.deevalleygroup.com Graham Scott (Chairman) Bryn Bellis (MD) D J Guest (Finance Director)



EAST SURREY HOLDINGS PLC East Surrey Holdings Plc supplies water to Croydon, Sutton and East Surrey and parts of Kent and Sussex in South East England, with sewerage services being provided by Thames Water Plc. The company is the holding company for Sutton and East Surrey Water Plc, which was formed in 1996 through the merger of Sutton District Water Ltd and East Surrey Water Ltd. The company dates from 1862 when the Caterham Spring Water Company was founded. Cateram merged with Kenley Water Co. to form East Surrey Water in 1885. Sutton & Cheam Water Co was founded in 1863 and was taken over by Sutton District Water in 1871. East Surrey merged with Leatherhead & District Water in 1927, the Chelsham and Warlingham Water Company and the Limpsfield and Oxted Water Company in 1930 and the Dorking Water Co in 1959. East Surrey Holding Plc, profit and loss account

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Water provision 40.4 34.8 36.6 37.2 38.0 Other activities 9.2 10.5 10.0 9.4 35.1 Group turnover 49.5 44.6 46.6 46.5 73.1 Operating profit 13.3 10.5 12.7 13.0 15.3 Pre-tax profit 18.9 14.9 17.3 15.2 9.2 Earnings per share (p) 25.8 21.5 28.1 29.5 11.8 Population served (000) 634 637 640 642 645 Measured water supplies (£million) 11.4 9.3 10.3 10.8 11.8 Total leakage (Ml/day) 24.4 24.4 24.2 N/A N/A

Turnover for water supplies in 2003-04 was £26.04 million for unmeasured supplies and £11.79 million for measured supplies. Measured supplies increased by £0.85 million over 2002-03 against a decline of £0.19 million for unmeasured supplies. Non-regulated activities include plumbing services, assurance and materials recovered from water treatment operations. Classic Water (mineral water) was sold in 2003 for a profit of £2.4 million. In 2004 there were 251,000 domestic customers and 19,000 commercial customers. 12,900 domestic properties were connected to water meters between 1998 and 2001, but the take-up since then has been weak. Leakage (including customer leaks) fell from 16.4% in 1998/99 to 15.8%, one of the lowest UK figures. In December 2003, the company purchased 75.5% of Phoenix Gas, a company providing gas to 68,500 customers in Northern Ireland for £180 million. Contact Details Name: East Surrey Holdings Plc Address: London Road, Redhill,

Surrey RH1 1LJ UK

Tel: +44 1737 772 000 Fax: +44 1737 766 807 Web: www.waterplc.com Web: www.eastsurreyholdings.com Patrick Barrett (Chairman) Philip Holder (MD) Nicholas Fisher (Finance Director)



FIRST AQUA (SOUTHERN WATER PLC) Southern Water provides water services to 2.3million people (1.0million connections) ijn south and south east England. The company provides sewerage services to a further 2.2million people (1.8million connections) who are served by the following water only companies: Folkestone and Dover Water, Mid Kent Water, South East Water, Portsmouth Water, Bournemouth & West Hampshire Water Cholderton and District Water, (not covered in this book, 1,500 people served) and Sutton and East Surrey Water. Since 1989, the company has reduced distribution losses from 26% to 11%, saving 148Ml per day. Despite its changing hands twice over the past six years, the company has been one of the most consistent performers in terms of service delivery. Southern Water was acquired by ScottishPower in 1996 following a hostile take-over. ScottishPower sold Southern Water to the Royal Bank of Scotland’s First Aqua consortium in April 2002 for £2,050 million, equivalent to SW’s regulatory value. As part of this, Veolia Water UK (the UK water arm of VE) was granted an option to acquire 20% of Southern Water and in turn to launch a full bid for the company. After political pressure in the UK prevented VE’s bid proceeding, VE consolidated a partial acquisition. First Aqua was acquired by Southern Water Investments in March 2003. In turn, Southern Water Capital (49% held by Royal Bank of Scotland and 51% by institutional investors) holds 75% of Southern Water Investments, with VE holding the other 25%. For VE, the £160 million investment (plus £110 million in Preference Shares, exercisable from 2008), is some way below its original £374 million investment. Southern Water Services Limited, profit and loss account

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Water turnover 145.9 120.5 116.5 115.6 118.2 Sewerage turnover 340.2 301.9 307.4 315.5 330.1 Total turnover 486.1 422.4 423.9 436.5 455.1 Operating profits 201.0 153.5 126.8 131.2 118.3

In 2003, First Aqua was refinanced based upon a series of AAA wrapped bond issues:

Bonds (million) Maturity (date) Rating & coupon £350 2029 AAA 6.202% fixed £188 2034 AAA 3.716% index linked £300 2007 AAA 6.185% fixed £350 2026 A-minus 6.650% fixed £153 2023 A-minus 3.826% index linked £120 2013 A-minus 6.935% fixed to 2009 £250 2038 BBB 7.879% fixed to 2014

Contact Details Name: Southern Water Address: Southern House,

Yeoman Road, Worthing BN13 3NX

E-mail: www.southernwater.co.uk Robert Thian (Chairman) Stewart Derwent (MD)



GLAS CYMRU (DWR CYMRU WELSH WATER) The evolution of Glas Cymru came as a response to extraordinary circumstances. Hyder Plc was the holding company for Dwr Cymru Welsh Water (DCWW, water and sewerage in Wales), Swalec (electricity and gas distribution in South Wales) and a number of related infrastructure service and investment activities. Despite its name (Hyder means ‘confidence’ in Welsh), the company’s belated diversification came at a high price in terms of the company’s gearing, with debt rather than equity being used, and its ability to deliver dividend growth. As a result, by April 2000, the company expected gearing to rise above the levels stipulated in its debt covenants by the end of 2001. Crucially, there was inadequate investor support for a rights issue at the time. In April 2000, Nomura International made an agreed bid for Hyder at 260p per share. The bid was designed to take the company private and to securitise its cash flows while ending dividend payments and selling off surplus assets. In June, WPD, a US utility JV, made a hostile 300p per share bid based upon breaking Hyder up and having Dwr Cymru’s services operated by United Utilities. WPD sought to sell DCWW’s assets and to award a management from the outset. During August 2000 there were revised bids by Nomura at 320p, WPD at 340p and Nomura at 360p. The Stock Exchange ended the process by calling for sealed bids. WPD won with a 365p bid while omura retained their previous bid. On September 7th 2000 it was announced that WPD had gained a majority of Hyder’s shares. The bid was completed on October 25th 2000 when the Hyder name was withdrawn in favour of Dwr Cymru. Glas Cymru’s management developed the concept of a bond financed company in 1999 and made formal offers with the support of Barclays Capital to buy DCWW from Hyder in 1999 and 2000. From the outset, the non-shareholder model was designed to significantly lower DCWW’s cost of capital through a single-purpose company designed to produce the highest quality debt rating. Glas Cymru was formally incorporated in April 2000 and became WPD’s preferred bidder for DCWW in November 2000. Ofwat cleared the acquisition in January 2001 and the acquisition was finalised in May 2001. Glas Cymru is restricted to running DCWW. DCWW was acquired for £1.85 billion against a Regulatory Asset Value of £2 billion, and Glas Cymru has raised £1.91 billion in debt finance. During the past year, Glas Cymru has concentrated upon developing conditions that would ease the cost of financing DCWW’s debt burden. The bond covenants were structured specifically to optimise the debt ratings, by minimising the risk attached to each bond issue.

Rating Size (£million) Bond Type Bond Coupon Maturity (years) AAA 350 Fixed 6.5% 27 AAA 300 FRN 6.6% 5-7 AAA 350 Index linked 4.0% 29-30 A- 325 Fixed 6.9% 20 A- 100 FRN 7.0% 4-7 A- 135 Index inked 4.4% 25-26 BBB 125 Fixed 8.2% 10 BBB 125 FRN 8.2% 4-7 Unrated 100 FRN 11.4% 5-7

The bond issue was 70% oversubscribed. The average real weighted cost of this debt (assuming a RPI of 2.5%) is currently 6.4%, while Ofwat has assumed a 6.5% average cost of capital for the sector. This has allowed more than £50 million pa in savings to be generated. Glas Cymru is also free from the burden of dividend payments. £295 million has been raised through three finance leases since March 2002, along with an £85 million 3.1% +RPI bond issue in April 2003. Financial reporting is on a quarterly basis. The original business plan envisaged the Regulatory Capital Value growing from £2,201 million in 2002 to £2,732 million by 2005, with net debt growing from £2,028 million to £2,332 million. The £400 million gap between these figures forms the equivalent of shareholders’ funds. By 2004, net debt was £2,173 and with an RCV of £2,594 million, meaning that reserves have already reached £421 million. Customer rebates worth a total of £23 million will be made in 2003 and 2004, or £10 per household in both of those years. After 2005, Glas Cymru aims to grow the customer rebate at least in line with the increase in the RPI. Since the formation of Glas Cymru £64 million has been allocated for service enhancements, environmental improvements and customer rebates. The £450 million asset operations and maintenance contract was won by United Utilities on both price and performance criteria. Thames Water gained the customer billing contract, while Severn Trent, who acquired Hyder’s laboratories in 2000, will carry out analytical services. There are also nine sewerage contracts being handled by a number of companies. The retendering for operation and maintenance contracts is taking place during 2004 to coincide with Ofwat’s AMP4 review process. There will be up to four asset operations contracts (up to 15 years duration at £150 million pa), up to seven asset investment contracts of up to ten years duration (worth £200 million pa) and one building and income contract of up to seven years duration, worth £20 million pa.



In December 2000, Ofwat determined that DCWW's price limits for the remaining four years of the five year period should be revised as follows:

2001-02 2002-03 2003-04 2004-05 November 1999 determination -0.5 0.0 1.2 1.0 Revised price limits 0.2 0.7 2.0 1.8 Cumulative difference 0.7 1.4 2.2 3.0

Dwr Cymru Cyfyngedig, profit and loss account

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Turnover 476.9 442.9 458.7 462.9 469.7 Operating profit 152.0 132.9 155.1 192.0 185.7 Pre-tax profit 98.0 41.6 41.6 68.2 43.9 Post-tax profit 99.1 46.2 41.4 60.8 45.6

Dwr Cymru has performed well in terms of improving its environmental performance, service delivery and relationships with its customers and stakeholders. Between 2001 and 2005, the equivalent of 2.56million people will be connected to sewage treatment works. The Green Sea/Môr Glas initiative involved allying the company’s £650 million coastal sewerage programme from 1995 to 2000 with £40 million of targeted spending to ensure that all 71 designated bathing areas reach the EU guideline standard by 2000. In 2003, 77 out of 78 designated bathing areas met the mandatory standard (one beach had circumstances outside the company’s control) and 83% reached the guideline level. In 1996, 97% of rivers were of good/very good quality, compared with 90% in 1990. Distribution losses have been reduced from 410Ml/day in 1996/97 to 230Ml/day in 2003/04, meeting Ofwat’s targets. Contact Details Name: Glas Cymru Cyfyngedig (Dwr Cymru Welsh Water) Address: Pentwyn Road, Nelson,

Treharris, Mid Glamorgan CF46 6LY, Wales, UK.

Tel: +44 1443 452 359 Fax: +44 1443 452 809 Web: www.glascymru.com Web: www.dwrcymru.com Lord Terry Burns (Chairman) Mike Brooker (MD) Chris Jones (Finance Director) Nigel Annett (Director) NOTE: The author is a Member of Glas Cymru Cyfyngedig.



KELDA GROUP PLC (YORKSHIRE WATER PLC) Yorkshire Water Plc (YW) was renamed Kelda Group Plc in August 1999. An aggressive approach towards resources management was unravelled by the ‘once in every 500 years’ drought conditions seen in 1995. No water supplies to the public were cut off, but the media and politicians managed to fuel public fears to the point of near hysteria. In consequence, £300 million was spent between 1996 and 1999 on developing a water grid. Distribution losses fell by more than 40% between 1995 and 2001 and were at Ofwat’s target of 295Ml per day in 2003-04. Capital spending for 2000-05 will total £1.45 billion before efficiency gains. An interim determination increased Kelda’s K from 1% to 3.4% for 2003-04 and 3.5% in 2004-05. Kelda Group, profit and loss account

Y/E 31/03 (£ million) 2000 2001 2002 2003 2004 Turnover Yorkshire Water 624.0 542.1 559.8 567.0 604.4 UK water services NA NA NA 16.9 30.7 Aquarion 17.0 77.7 70.5 93.7 94.1 Operating profit Yorkshire Water 271.5 214.8 225.5 233.7 252.5 UK water services NA NA NA 2.4 2.0 Aquarion 6.1 27.1 26.3 34.9 31.6 Group Turnover 782.8 774.6 799.8 838.1 822.6 Operating profit 284.5 238.9 265.3 277.1 292.2 Net interest -65.3 -98.4 -102.8 -108.9 -100.6 Exceptional items 0.0 15.9 34.4 -10.9 14.6 Pre-tax profit 222.1 156.4 197.1 164.3 191.6 Earnings per Share (p) 54.1 31.6 39.2 32.7 47.1 Dividends per Share (p) 24.15 24.8 25.5 26.1 26.8

Kelda Group, number of people served in the UK and internationally

Water Sewerage Total Yorkshire Water Services 4,451,000 4,843,000 4,843,000 York Waterworks 174,000 0 174,000 Scotland – PFI 0 450,000 450,000 USA 677,000 0 677,000 Total 5,302,000 5,293,000 5,935,000

UK – Acquisition of York Waterworks Plc York Waterworks was the smallest of the listed former SWCs when it was acquired for £27.9 million in March 1999 and was cleared in June 1999. The acquisition involves existing customers of York Waterworks receiving extra price cuts of 15% by 2004, as well as enhanced metering and leak reduction services. York Gas was sold in 1999. York Waterworks generated a 1999/00 turnover of £9.6 million. The company was subsumed within Yorkshire Water Services in 2000. UK – PFI in Scotland 2000 Aberdeen 25 year PFI BOT 250,000, sewage treatment

In May 2000, Aberdeen Environmental Services Ltd., a Kelda-led consortium (45% Kelda Group, the rest held by Balfour Beatty and Tyco’s Earth Tech) gained the contract with the North of Scotland Water Authority for an £80 million PFI sewage treatment works project serving Aberdeen, Stonehaven, Peterhead and Fraserburgh. Kelda’s Grampian Waste Water Services Ltd is operating the facility until 2031 and is currently generating revenues of £10 million pa. The facility will be extended to cover Stonehaven by 2005, when 450,000 people will be served. UK – Project Aquatrine 2003 UK MoD 25 year PFI Water & wastewater services Bray Utilities, consisting of Kelda (45%), Earth Tech (Tyco International, 45%) and Kellogg Brown & Root (USA, 10%) gained Package A of Project Aquatrine, serving 1,100 military sites in South West England, the Midlands and Wales. The contract is worth £1 billion, 80% of which is being operated by Yorkshire Water Projects. The project started in December 2003.



USA - Acquisition of Aquarion In June 1999, Kelda launched an US$ 444 million agreed bid for Aquarion, a US water provision company. The two companies had been co-operating in various projects for a number of years previous to the bid. The acquisition was completed in January 2000. Aquarion was incorporated in Delaware as The Hydraulic Company in 1969 to become the parent company to BHC, a Connecticut corporation founded in 1857. The corporate name was changed to Aquarion Company in 1991. Aquarion's utility subsidiaries, BHC Company (BHC) and Sea Cliff Water Company (SCWC, founded in 1873, water provision to 15,000 people in Long Island) collect, treat and distribute water to residential, commercial and industrial customers, to other utilities for resale and for private and municipal fire protection. The utilities provide water to 147,000 customers in 30 communities with a population of more than 500,000 people in Connecticut and Long Island, New York. In 1999, 75% of group turnover came from the company’s water activities. Operating revenues of the utilities come from the following sources: residential customers; 63%, commercial customers; 16%, industrial customers; 3%, fire protection customers; 13%, and other sources 5%. Village Water, serving 5,200 customers (18,200 people), was acquired in May 2000. The utilities' service areas, primarily residential in nature, have experienced an average growth in accounts of approximately 1% percent per year over the last 10 years. Industrial use has declined significantly in that time. Kelda is currently concentrating on reducing distribution losses at Aquarion and developing the company as a base for further expansion into the USA. In 2002-03, the sale of 15,300 acres of land in Connecticut was completed, resulting in a £60.3 million gain. This money is being invested in the USA operations. The non regulated water sector business also achieved a significant success with the award of a 10 year, $110 million contract to operate the wastewater treatment plant for the Water Pollution Control Authority in Bridgeport, Connecticut, commencing in April 2003. In total, 11 water and waste water contracts were gained by Aquarion in New England during 2002-03, with the company currently operating more than 40 contracts. Acquisition of American Water Works’ New England interests In April 2002, Kelda acquired four of American Water Works’ companies for US$120 million, plus US$104 million of debt. These companies cover 17 municipalities and serve 64,000 customers, or 177,000 people.

Customers People Towns Connecticut-Aquarion Water Company 27,000 87,000 6 Massachusetts- Aquarion Water Company 17,000 26,000 5 New York- Aquarion Water Company 8,000 20,000 3 Hampton Water Aquarion Company (New Hampshire) 12,000 44,000 3

Over 60% of the customers are located adjacent to BHC’s existing franchise. For the year ended 31 December 2000, the aggregate turnover of these was US$ 47.3million with a pre-tax profit of US$8.5 million. The transaction is conditional upon various US regulatory approvals, which are to be received in the first half of 2002. The Connecticut activities will be merged with BHC, while the other activities will be operated as a separate entity. Contact Details Name: Aquarion Address: 835 Main Street, Bridgeport,

CT 06604 Tel: +(203) 336-7626 Fax: +(203) 336-5639 Web: www.aquarion.com Web: www.bhcco.com Contact Details Name: Kelda Group Plc Address: Western House, Halifax Road,

Bradford, Yorkshire BD6 2SZ Tel: Tel: +44 1274 600 111 Web: www.keldagroup.com Web: www.yorkshirewater.com John Napier (Chairman) Kevin Whiteman (CEO) Martin Towers (Finance Director) Kevin Whiteman (MD, Yorkshire Water Services Ltd.) Chuck Firlotte (CEO, Aquarion)



NATURE TECHNOLOGY SOLUTIONS Nature Technology Solutions (NTS) was floated on the UK AIM market as Owl Technologies in September 2001, and changed its name to Nature Technology Solutions in August 2002. The company operates a marine wastewater treatment plant in Gibraltar for oil, industrial and municipal wastewater under a 20 year agreement with the Government running to 2019. In June 2002, Owl Technologies acquired Nature Technology Solutions AS of Norway for £2.4 million. Nature Technology Solutions, profit and loss account YE 31/12 (£ 000) 2001 2002 * 2003 Turnover 91.7 336.5 555.1 Operating profit 51.5 -351.7 225.2 Pre tax profit -192.6 -1,296.7 -556.2 Net profit -192.6 -1,296.7 -556.2 Earnings per share (p) -0.005 -0.009 -0.002

* 17 month period NTS has a wastewater storage and treatment facility at NorSea Base in Tananger, Norway. From the unloading station, water is transferred to one of the NTS storage tanks. The total storage capacity available at the site is 2,300m 3, with a treatment capacity of 15m3 per hour. The Gibraltar facility handles hydrocarbon and other liquid wastes at 20m 3 per hour with 900m 3 in storage capacity available. A 2,500m 3 storage facility at the colony’s Ministry of Defence base will enter service at the end of 2004. Further industrial wastewater treatment facilities are being developed in Denmark (entering service at the end of 2004) and in the Middle East. Contact Details Name: Nature Technology Solutions Address: Ordnance House, 31 Pier Road,

St Hellier, JE4 8PW Jersey, UK

Web: www.oesglobal.com Web: www.naturetechsolution.com Richard Eldridge (Chairman) John McJeown (CEO) Barry Ridley (Director) Stig O Keller (Technical Director)



NORTHUMBRIAN WATER PLC Northumbrian Water Plc was acquired by Suez in 1996. It was subsequently transformed into the holding company for all of Suez’s water activities in Britain, along with being the base for their Anglophone markets. In 2001, Northumbrian Water Group was renamed Ondeo Services UK. The regulated water and sewerage activities of OSUK consist of the 1996 merger of Northumbrian Water Services Limited and North East Water Limited and the consolidation of Essex and Suffolk Water Limited. In May 2003, Suez reduced its stake to 25% through a buyout to a consortium set up by Ecofin Limited. The company was renamed Northumbrian Water Plc, floated on the AIM and returned to a full London Stock Exchange Listing in September. Northumbrian Water, profit and loss account

1/05 - 31/03 (£ million) 2004 UK water 386.2 International water 17.1 Group turnover 442.1 Northumbrian Water Limited 133.4 International 2.1 Group operating profit 143.6 Net interest (92.8) Associates, etc. 2.5 Group pre-tax profit 45.5 Minority interests (0.1) Net profit 59.4

Year end change and change of status makes previous figures non-comparable Actual 12 month revenues were £520.8 million on a pro forma basis, with pre-tax profits of £54.0 million. Northumbrian Water Services Limited The merger of Northumbrian Water Limited (NWL) with North East Water (acquired by Suez in 1989) allowed for immediate economies of scale. The only water entity in the region not held by NWG is Hartlepool Water (92,000 people), which was acquired by AWG in 1997. Essex & Suffolk Water (acquired by Suez in 1988) was merged with Northumbrian during 2000 and now operates under a single licence via two divisions, NWL North serving 2.6million people in the Northumbrian Water area and NWL South serving 1.7million people in the Essex & Suffolk Water area. NWL is now the sixth largest water and sewerage company in England and Wales.

Population served Water Sewerage Total Northumbrian Water 1,328,000 2,547,000 2,547,000 North East Water 1,195,000 0 1,195,000 Essex & Suffolk Water 1,662,000 0 1,662,000 Total 4,185,000 2,547,000 5,406,000

NWL is spending £190 million on installing secondary treatment at 17 wastewater treatment facilities as part of a £730 million capital spending programme between 2000 and 2005. The company’s £200 million wastewater treatment facility at Bran Sands was completed in 2002 and is designed both to treat effluents from 500,000 people and to offer effluent treatment services to major industrial customers. These include Corus Plc, Shell Plc, and Phillips Petroleum, along with Hunstman and Vopak in 2003-04. The latter, for example, signed a 15 year water treatment contract in 2000. In 1999, NWL signed a contract for water provision to all of the Scottish Courage breweries in the UK. Northumbrian Lyonnaise International (NLI) Suez developed NWG’s international activities so that they address Suez’s potential English speaking markets. This fits in with the company’s current focus on markets such as India, Scotland, and Scandinavia, along with those parts of Africa and Middle East where British connections are deeper set than those of the French. The Australian activities have been kept by Suez.

Population served Water Sewerage Total Northumbrian Water 4,185,000 2,547,000 5,406,000 Scotland 0 890,000 890,000 Ireland 0 220,000 220,000 Gibraltar 26,000 0 26,000 Total – UK 4,185,000 3,437,000 6,296,000 Total – International 26,000 220,000 246,000 Total 4,211,000 3,657,000 6,532,000



Gibraltar - LDE This is a water service provision contract in a JV with the Government, along with a management contract for sewage pumping and utility billing and meter reading services. 26,000 people are served. The 30 year contract was awarded in 1991. NW holds 66% of the company, which generated a turnover of £7.8 million in 2002. Scotland

1999 Levenmouth 40 year PFI BOT 440,000 sewage treatment 1999 Ayr 30 year PFI BOT 450,000 sewage treatment

These contracts are being used to form the basis of PFI type contract marketing in Ireland. They were awarded to a consortium consisting of Northumbrian Water, Degrémont and AMEC, in the case of Ayrshire, and Northumbrian Water and Degrémont in the case of Levenmouth. Each contract involves £50 million in capital spending. NWG holds 75% of Caledonian Environmental Services’ (Levenmouth) equity and 50% of Ayr Environmental Services’ equity.

Ireland

2002 Cork 22 year BOT 220,000 wastewater treatment

The €70 million contract is part of a €270 million drainage and effluent treatment scheme for the city, which is due to be completed in 2004. The STW will have a 270,000m 3 capacity with a PE of 440,000, half being for industrial clients. Contact Details Name: Northumbrian Water Plc Address: Northumbria House, Abbey Road,

Durham, DH1 5FJ, UK.

Tel: +44 191 383 2222 Fax: +44 191 384 1920 Web: www.nwl.co.uk Sir Fred Holliday (Chairman) John Cuthbert (MD) Christopher Green (Finance Director)



PENNON GROUP PLC (SOUTH WEST WATER PLC) In 1998, South West Water Plc was renamed Pennon Group Plc. Pennon is based on the Old English for a long flag or pennant. The regulated activities are still called South West Water Limited, while Haul Waste, the waste management arm operates under Viridor Ltd (the Latin ‘to make green’). South West Water Services Limited remains firmly fixed between the rock of occupying some of the poorest regions of Britain and the hard place of the demands placed on its sewerage infrastructure by its large number of designated bathing areas within its territory. South West Water supplies water and sewerage services to 1.5million people in the south west peninsula of England. This figure is boosted by up to 500,000 tourists every year given the region’s popularity as a holiday destination. Over the past 10 years, the company has moved away from primary treatment and long sea outfalls, to secondary and more advanced sewage effluent treatment. 30 schemes currently include ultraviolet disinfection of effluents before discharge. 140 out of 141 designated bathing waters met the EU’s mandatory standard in 2003, along with 115 gaining the guideline standard. Ofwat’s 12.2% price reduction resulted in 2000/01 turnover falling by 10.7% at a time when operating costs rose by 1.4% after efficiency measures saved £5.8 million. In December 2001, SWW was granted a 4.4% pa increase in average bills for the final three years of the current period. Pennon Group, profit and loss account

Y/E 31/03 (£ million) 2000 2001 2002 2003 2004 Water - Turnover 280.2 251.4 260.4 270.2 291.8 Water - Operating profit 146.8 107.3 107.0 111.5 118.9 Water - Pre-tax profit 108.0 67.0 66.8 67.1 70.1 Group turnover 467.0 435.1 423.9 417.2 471.3 Operating profit 167.1 128.1 121.8 127.0 129.8 Group pre-tax profit 121.6 74.2 77.4 74.2 72.3 Post-tax profit 116.6 74.2 74.1 57.1 61.5 Earnings per share (p) 85.8 41.4 54.2 44.2 49.5

Inset appointments in the UK – Enviro-Logic and Albion Water In May 2003, Pennon bought the outstanding shares in its Albion and Enviro Logic JVs. Albion Water seeks to mobilise water resources that are generally not suitable for human consumption and apply them to specific industrial end users. In 1999, Albion Water (Shotton) Limited gained the right to supply water to Shotton Paper on Deeside in Clwyd from a disused mine in place of Dwr Cymru Welsh Water. It is worth £18 million over its 10 year life. Albion Water has become the first new entrant to the England and Wales regulated water and sewerage industry since 1989. E-L advised Ofwat in 2000 that it was pursuing 200 new opportunities. A total of 18 applications were at the discussion stage with Ofwat in April 2002. E-L’s other activities are the Metropolitan Groundwater Company, which develops groundwater resources into new supplies of water for large user urban clients based in urban. Contracts gained been for a number of hospitals in southern England. The Centre for Environmental Research carries out consulting projects on behalf of clients in order to optimise their water and sewerage service provision costs. E-L has saved clients £30 million in water and sewerage fees since 1991. Contact Details Name: Pennon Group Plc Address: Peninsula House, Rydon Lane,

Exeter EX2 7HR UK

Tel: +44 1392 446 688 Fax: +44 1392 434 966 Email: www.pennon-group.co.uk Ken Harvey (Chairman) David Dupont (Finance Director) Robert Baty (CEO, South West Water Ltd.) Colin Drummond (CEO, Viridor Ltd.)



SEVERN TRENT PLC Severn Trent Water supplies water and sewerage services to the 8million people in the catchment areas of the rivers Severn and Trent. This includes Birmingham, Britain’s second largest city, the English Midlands and a part of central Wales. Severn Trent is the third largest of the UK Water Plcs and was formed from the merger of 234 local entities in 1973. In the UK, the company sought to bid for South West Water Plc (Pennon) after Wessex Water launched a hostile bid in 1996. This bid was blocked by the MMC and since then, Severn Trent has concentrated on investigating potential inset appointments and PFI contracts in the UK. The company has a good reputation for water resource management and a pro-active approach to regulatory and environmental developments. Work on water leakage (a decrease of 30% from 1989 to 2002) and changes in industrial usage have seen the average annual water demand fall by 15% since 1995. Industrial water contracts are being actively sought and Severn Trent has gained national accounts for Northern Foods (Bowyers) and Centre Parcs, generating a total turnover of £3.5 million pa. Contracts gained in 2002-03 include Rank Hovis McDougalls, Dairy Crest and Northampton General Hospital. Severn Trent, profit and loss account

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Severn Trent Water Turnover 982.1 887.2 899.9 917.9 956.7 Restructuring provision -56.1 0.0 0.0 0.0 19.8 Operating profit 362.4 330.5 334.1 325.4 356.4 Group Turnover 1,566.6 1,681.6 1,799.1 1,852.0 2,015.1 Corporate costs -1,180.5 -1,323.1 -1.436.9 -1,519.0 -1,624.4 Operating profit 386.1 358.8 375.3 333.0 390.7 Income from associates 8.6 8.8 9.9 10.0 10.7 Net interest -120.7 -161.1 -159.0 -159.4 -168.0 Pre-tax profit 274.0 206.2 216.3 184.4 254.4 Tax charge -22.1 -64.8 -58.4 -84.3 69.6 Post-tax profit 251.9 141.4 157.9 100.1 184.8 Earnings per Share (p) 73.8 41.0 45.7 28.9 53.5 Dividends per share (p) 43.0 45.0 45.9 45.9 47.0

Severn Trent Services Severn Trent Services (STS) is based in the USA. It offers laboratory analysis (Analytical Services), water purification products (Water Purification Solutions) and operating services (North American Operating Services), with an international arm serving customers in the same sectors in the UK and Europe. Over the past three years, STS has acquired a series of laboratories in the USA including four in 2000-01, where it aims to repeat the success it has achieved in the UK. In 2000, STS acquired Hyder Laboratories Ltd., to extend its testing activities into Wales.

STS acquisitions 1999-00 2000-01 2001-02 2002-03 2003-04 Companies 18 8 5 3 3 Cost (£million) 139 41 18 N/A N/A

Severn Trent Environmental Services (STES) and Severn Trent Operating Services’ (STOS) stated policy is to avoid BOT and construction type contracts and to concentrate on asset and services management, along with a number of investments in major projects. It is one of the lower key players in the international market, but with a good track record and steadily improving profitability. Severn Trent has one of the world’s largest water and wastewater consulting operations and in recent years has carried out consulting work in 48 countries, and is currently active in the USA, Belgium, Azerbaijan, Russia, the Ukraine, and South Africa. Severn Trent Services

Turnover, Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Operating services - STES & STOS 95.6 122.2 120.6 126.1 128.1 Water purification 67.2 73.0 89.4 87.5 82.9 Laboratories 80.0 155.2 171.6 171.8 170.2

The investment in Belgium’s Aquafin has been amply justified. Given its track record to date, Severn Trent enjoys the possibility of being a dark horse in the European and American markets. Despite having made unsuccessful bids for water and sewerage projects in Spain, Germany and Portugal over the past three years, STWI continues to concentrate on seeking new opportunities in these markets, along with Italy and Scotland. The company has stated on a number of occasions that it is not keen to enter the Asian market for the time being. One of the reasons for its failure to win these projects is that Severn Trent does not price in losses over several years, which is the common French practice. Italy and the USA are regarded as the main markets for growth in the short to medium term. In 2001-02, the company had 600 water and wastewater contracts in the USA, with a 77% contract retention rate, against 80% in 2000-01.



Severn Trent, number of people served in the UK and internationally

Country Water Sewage Total England & Wales 7,250,000 8,280,000 8,280,000 Belgium 0 2,870,000 2,870,000 Portugal 154,000 0 154,000 Germany 0 45,000 45,000 Italy 350,000 350,000 350,000 USA 500,000 2,000,000 2,500,000 Total - home market 7,250,000 8,280,000 8,280,000 Total - international 1,004,000 5,395,000 6,049,000 Grand total 8,254,000 13,575,000 14,329,000

Belgium

1990 Flanders Holding in Aquafin NV 3.0million sewerage SVTI acquired 20% of Aquafin NV in 1990. Aquafin was set up by the Flemish Regional Government to oversee the region’s belated development of its sewerage network to serve its 5.781million inhabitants. It is 51% held by the Flemish Regional Government, 20% held by SVTI, with the other 28% being held by a number of institutional investors. SVTI is using this contract to gain experience in developing large and advanced sewerage systems effectively from scratch. One of the key characteristics of the project has been the development of remote sensing and operations management systems, thereby keeping on site staffing costs to a minimum. (See company entry.) Germany

1993 Nohra 15 year O&M 45,000 sewage Severn Trent Wasser and Abwasser GmbH (STREWA) has a strategic stake in BFG Nohra. The sewage treatment works also handles wastes from a nearby abattoir, which adds considerably to its treatment load. With seven years of the contract to run, STREWA believes that the contract can be extended at the re-bidding stage. Portugal

1998 Santo Tirso 25 year concession 106,000 water The concession entered into operation in 1998. Severn Trent also gained a 25 year water provision concession for the town of Santa Maria de Feria.

1996 Fafe 25 year concession 48,000 water Severn Trent holds 30% of Indaqua Industria e Gestao de Aguas SA. Drinking water provision is to expand from 67% of the town’s inhabitants to 95% over the next seven years. Italy In February 2000, Severn Trent Italia (SVTI) acquired Ecotechnica SRL as part of a strategy of bidding for water and wastewater privatisation opportunities in northern Italy. Ecotechnica is based in Milan and was purchased from Group Maffei. The company operates wastewater facilities in the Bresica region. It has a turnover of £8.5 million pa, bringing SVTI’s Italian turnover to £20 million. Previous acquisitions were Baden Italia SPA in Lombardy (water treatment plants, April 1999), La Biodepuratrice in Bergamo (wastewater plants and operations, 1999) and Baltea Impianti Depurazione SRL (Valle d’Aosta, October 1998). These companies are active in water engineering in the region. SVTI serves 600,000 people in Italy.

2002 Terni 30 year concession 250,000 water & wastewater The Umbrian ATO concession award will generate revenues of €19.5 million, linked with a €192 million capex programme. SVTI holds 25% of the operating consortium, which gained the concession in February 2002. USA North American Operating Services believes that is it the third largest contract operations player in the US market for management services for municipal and industrial water and wastewater systems, with 400 contracts covering 600 water and wastewater treatment facilities. SVT started through the 1994 acquisition of AM-TEX, a company founded in 1974. In 1997, Severn Trent acquired MHPC, New York state’s largest contract operator for water and wastewater facilities, with 75 communities served, and Texas’ MTS, serving 26 municipal utility districts in Houston. Turnover for contract operations the USA grew by 7% in 2002-03 and 2003-04, boosted by increased municipal demand. US$ 200 million of new business is currently being bid for.



City/state Contract started Comments Jackson, Mississippi 1985 3 WWTWs, 125 MGD Glen Cove, New York 1996 20 Year O&M, WWTW Chickasha, Oklahoma 1982 WWTW Pasadena, Texas 1994 3 WWTWs

Industrial clients in the USA include: General Motors (Automotive manufacture) General Electric (Jet engine inspection, repair and maintenance) The Minute Maid Company (Juice and beverage production) C&H Sugar Company (Sugar refinery) The Pillsbury Company (Refrigerated baked goods) Precision Extrusions, Inc. (Aluminum extrusions, secondary machining, fabrication and assembly) Wawa Dairies (Milk products) Gulf State Canners (Canning) IBM (Computer/electronic equipment) Contact Details Name: Severn Trent Plc Address: 2297 Coventry Road,

Birmingham B26 3PU UK

Tel: +44 121 722 4000 Fax: +44 121 722 6150 Web: www.severn-trent.com Web: www.stwater.co.uk Web: www.stwaterinternational.com Sir John Egan (Chairman) Colin Matthews (Acting Managing Director) Mark Wilson (Finance Director)



SOUTH DOWNS LTD South Downs Ltd owns Portsmouth Water Plc. Portsmouth Water supplies water to 654,800 people via 292,000 connections in Portsmouth and parts of the Hampshire and West Sussex coast, with sewerage services being provided by Southern Water (First Aqua). Portsmouth Water started operations 1857, building upon supply entities dating back to an Act of Parliament in 1740. The company merged with the Gosport Water Company in 1955 and acquired further entities serving Bognor Regis and Chichester in 1963. Portsmouth Water Plc, profit and loss account

Y/E 31/03 (£million) 2002 2003 2004 Turnover 29.67 29.55 30.70 Operating profit 10.68 10.08 10.14 Pre-tax profit 8.90 9.53 7.84 Net profit 6.32 6.91 5.56

A bulk supply contract has been agreed with Southern Water, which will come into effect in 2003-04. This contract will provide Southern Water with up to 15 million litres of water per day during periods of prolonged drought. A £1 million lead reduction programme is upgrading four extant treatment plants, installing seven new treatment plants and dosing water to minimise its plumbsolvency. Full compliance with the proposed 10mg/L standard for lead in drinking water is anticipated by 2003. Leakage has fallen by 41% between 1990 and 2003. Until December 2001, Portsmouth Water Plc was owned by Brockhampton Holdings Plc a listed company. In October 2001, a £71 million management buyout by South Downs Ltd was announced. At the outset, South Downs Ltd was 15% held by Brockhampton Holdings’ management, 45% by the South Downs Employee Benefit Trust and 40% by Drummond Capital, part of the Royal Bank of Scotland Group (RBS). In March 2002, RBS sold 31% of the company to Abbey National Treasury Services Plc. A £66 million AAA rated bond issue was completed in June 2002, reducing the cost of financing to 3.635%. Contact Details Name: Portsmouth Water Ltd, Address: P.O. Box 8,

West Street, Havant, Hampshire PO9 1LG

Tel: +44 23 9249 9888 Fax: +44 23 9245 3632 Web: www.portsmouthwater.co.uk Terry Lazenby (Chairman) Nicholas John Roadnight (MD) Neville Smith (Finance Director)



SOUTH EAST WATER PLC South East Water (SEW) was formed in 1996 when SAUR brought together its controlling interests in three statutory water companies operating in southern England: Mid Sussex Water, Eastbourne Water and West Kent Water. In 1999 Mid Southern Water, which was also owned by SAUR was integrated into SEW. All four companies had been acquired by SAUR Water Services UK between 1988 and 1990. SEW serves a total of 1.5million people, including 500,000 domestic and 45,000 commercial and industrial customers . Other activities include Pipeway, Dynamco (water engineering, consulting and testing) and Optimum Information Systems Limited. South East Water Plc, profit and loss account

Y/E 31/03 (£million) 2001 2002 2004 Turnover 91.5 91.5 119.1 Operating profit 39.1 37.0 40.7

Year ends were 31/12 for 2001 and 2002 but 2004 is a 15 month year, reflecting the year end change. In September 2003, SEW was sold to Australia’s Macquarie Bank for £386 million. SEW’s assets have been transferred to the Macquarie European Infrastructure Fund, which went into operation in April 2004 with an initial capital of £422 million. The Fund aims to raise between € 500 and 1,000million to invest in eight to ten companies in electricity and gas transmission and distribution networks, water and sewerage companies, toll roads, rail and related infrastructure, airports and communications infrastructure. Macquarie has sold all but 24.9% of its holding in SEW to the Fund and the Fund’s co-investors. Macquarie sought to acquire Northumbrian Water in May 2003. Contact Details Name: South East Water Plc Address: 3 Church Road

Haywards Heath, West Sussex RH16 3NY

Tel: 01444 448200 Fax: 01444 413200 Web: www.southeastwater.co.uk Margaret Devlin (Managing Director) Liz Snaith (Finance Director)



SOUTH STAFFORDSHIRE PLC South Staffordshire provides water to the English West Midlands, including Walsall and West Bromwich. Sewerage services are provided by Severn Trent Plc. South Staffordshire Water Plc was founded in 1853, but only floated in 1991, making the company a late entrant to the stock market when compared with many of its peers. In April 2004, South Staffordshire Group was split into South Staffordshire Plc (regulated and non-regulated water activities) and Homeserve Plc (other non-regulated activities). South Staffordshire Plc, profit and loss account

Y/E 31/03 (£million) 2001 2002 2003 2004 Water provision 58.37 59.13 58.84 60.43 Non-regulated activities 14.30 22.54 26.59 24.69 (Inter-segment turnover) -8.59 -13.47 -12.09 -12.29 Group turnover 64.06 68.20 73.34 72.83 Operating profit 18.75 19.88 21.40 20.86 Pre-tax profit 17.69 18.86 16.78 14.52 Earnings per share (p) 99.4 121.1 97.5 83.1 Dividends per share (p) NA NA NA 46.0

Non-regulated activities include: Home Service provides emergency plumbing services on behalf of Yorkshire Water (Kelda), Mid Kent Water, Anglian Water & Hartlepool Water (Awg), Three Valleys Water (Vivendi Environnement), Dwr Cymru (Glas Cymru), Northumbrian Water and Thames Water (RWE). In 2001, the company signed a JV with Genéralé des Eaux (Veolia Environnement) to expand its services into France. OnSite provides water and wastewater services to utilities and industrial clients. These include United Utilities, Thames Water, Scottish Water and Wessex Water (YTL). In December 2000, OnSite gained a £20 million four year contract to provide wastewater network services for half of Thames Water’s sewerage network. Customer Solutions’ RAPID customer management software is a market leader in the UK, where it is used for 2.4 million customer accounts by Wessex Water, South West Water (Pennon Group) and Bristol Water and for 100,000 industrial accounts for Hartlepool Water and West of Scotland Water. The company supplies 510,000 customers (1,233,000 people) in 510,000 properties, with 56,500 being connected to metered supplies. The company’s average bill of £86 per household is the second lowest in the UK private sector and the company has a policy of aggressively exceeding service and infrastructure targets set by Ofwat. South Staffordshire been reclassified as a Support Services company rather than a water provision company, due to the water sector’s somewhat depressed market rating. Contact Details Name: South Staffordshire Plc Address: Green Lane,

Walsall, West Midlands, WS2 7PD UK

Tel: +44 1922 638 282 Fax: +44 1992 723 631 Web: www.south-staffordshire.com Web: www.south-staffs -water.co.uk David Sankey (Chairman) Dr Jack Carnell (Managing Director, regulated activities) Adrian Page (Group Finance Director)



SWAN GROUP PLC Swan Group is the new name for Mid Kent Holdings (MKH). The new name was adopted in order to project a more geographically diverse identity. In March 2001, Swan Capital Group Ltd. launched a management buyout of MKH backed by West LB. The £106 million offer was declared unconditional in May 2001 and the company was subsequently delisted. Mid Kent Water Plc

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Water supply 40.4 33.6 35.8 36.7 38.5 Other activities 2.8 3.0 2.9 4.4 4.5 Group turnover 43.2 36.6 38.7 41.1 43.0 Operating profit 19.4 8.8 14.2 11.5 14.2 Pre-tax profit 16.8 7.3 10.4 7.5 8.6

Mid Kent Water was founded in 1898, supplying 12 parishes in the mid Kent region. It became a Plc through the formation of Mid Kent Holdings Plc in 1989. The company has 218,820 household and 23,800 business connections, serving 569,000 people in total. Mid Kent Water supplies water to Maidstone and parts of Kent in South East England, with sewerage services being carried out by Southern Water (First Aqua). A bitterly contested bid in 1996 by SAUR Water Services (Bouygues) and the then called General Utilities Plc (Veolia Environnement) was blocked by the Monopolies and Mergers Commission (MMC, now the Competition Commission) in January 1997. The two companies sought to acquire Mid Kent Water because of its relatively abundant water resources, which bounded companies owned by them that have been facing long time water shortages. Leakage fell from 44Ml/day in 1992 to 28 Ml/day by 2003. Non–regulated activities include Halcrow Water Services (consulting), Eclipse (testing and analytical services), Inenco Group (utility consulting) and Waterlink Services (plumbing). Halcrow Water Services was formed in 1995 as a joint venture between the Halcrow Group and Mid Kent Water. The joint venture has carried out water projects in the UK (Scotland, Northern Ireland and southern England) leakage reduction projects in Venezuela and Cyprus and other projects in India, Ecuador, Poland and Indonesia. Contact Details Name: Swan Group Plc Address: High Street,

Snodland, Kent ME6 5AH

Tel: +44 1634 873 000 Fax: +44 1634 243 774 Web: www.midkentwater.co.uk Web: www.swan-group.com Mark Gomar (Chairman, Swan Group) Richard Leigh (Finance Director) Paul Butler (MD, Mid Kent Water) Gordon Maxwell (Chairman, Mid Kent Water)



UNITED UTILITIES PLC United Utilities Plc (UU) is a multi-utility, whose main UK base is in the north west of England, where it provides water supply, sewerage, and electricity supplies to 7million people. Formed from the 1995 takeover of NORWEB (electricity distribution) by UU Water (water supply and sewerage), UU is involved in the provision of telecommunications services (Your Communications). The integration of customer calls for all services has been completed. UU’s set of telecommunications services for business customers have been grafted upon these activities. These activities are now grouped in five divisions: • UU Service Delivery – manages and maintains the water, wastewater and electricity assets within its

statutory areas of operation. • UU Customer Sales – manages the relationship with domestic and business customers within its statutory

water area and manages non-regulated sales growth within this region. • UU Contract Solutions – manages and operates assets outside its statutory areas of operations and brings

together its other non-regulated asset-based activities as one business. United Utilities International sits within this part of the organisation.

• Vertex – Outsourcing of customer management services in the UK • Your Communications – Voice, mobile and datacommunications services in the UK United Utilities’ £1 million rights issue (£500 million in September 2003 and £500 million in June 2005) is the first rights issue to explicitly earmark funds for water and wastewater infrastructure spending since the 1989 privatisation. While the rights issue will require additional dividend payments of £40 million per annum, this is less than the coupon additional debt would have commanded, while lowering the coupon for future debt issues. By avoiding underwriting, the total cost of the issue is £10 million. United Utilities, profit and loss account

Y/E 31/03 (£million) 2000 2001 2002 2003 2004 Turnover Multi Utilities 1,356.5 1,102.6 1,208.9 1,230.1 1,300.7 Infrastructure Management 177.8 197.6 385.9 397.1 446.9 Operating Profits Multi Utilities 602.6 500.9 529.6 502.8 516.9 Infrastructure Management 15.7 20.0 30.0 58.8 67.8 Group turnover 2,356.3 1,692.4 1,871.6 1,920.5 2,115.5 Operating profit 665.4 498.1 553.3 561.7 597.1 JVs and associates 4.0 8.7 11.8 14.9 13.6 Net interest -206.0 -220.3 -230.6 -231.4 -248.1 Disposal of businesses 0.0 191.2 0.0 34.0 1.9 Pre-tax profit 459.4 477.7 302.8 327.5 349.0 Earnings per Share (p) 60.8 61.6 42.3 45.7 52.1

In September 1999, the Mersey Basin gained the River Prize for the best river clean up operation in the world. This reflects the gains made since the Mersey Basin campaign started in 1981, when Europe’s most polluted river was described as an ‘affront to civilised society’. 2,000km of waterways have been restored since then, with UU spending £1.6 billion on capital works to divert domestic and industrial effluents into an integrated sewerage diversion and sewage treatment scheme between 1989 and 2002. In 2001, the first salmon were caught in the Mersey since 1921. After £1.1 billion in spending between 1990 and 2002, the problem of the region’s bathing water is being tackled. Compliance has moved from 18% in 1988 to 97% in 2002. In 1997, after the main scheme had been completed, compliance was at 50% and a £150 million follow-up scheme concentrated on upgrading specific STWs and to reduce further a number of storm water discharges. In 1999, 11 out of 34 designated beaches failed the mandatory criteria and this fell to 6 in 2000. Bathing water compliance 2001 2003 Guideline 4 4 Mandatory 26 32 Fail 4 1



UU Industrial: Industrial water outsourcing UU acquired Hyder Industrial Solutions (HIS) from Hyder after the latter company’s take-over in 2000. The company provides water and wastewater provision and treatment services through the development of dedicated facilities.

Year 2001-02 2003-04 Customers NA 400 On-site customers NA 21 Wastes treated (million m 3) 38 40 Revenues (£ million) 12 20

Park Environmental in Newport, South Wales and Ellesmere Port was acquired for £8 million in 2004; this liquid waste treatment facility has revenues of approximately £10 million. Wales The four year operations contract with Glas Cymru for Dwr Cymru Welsh Water’s (DCWW) operations started in April 2001. This contract was originally worth £450 million and has since been expanded to £600 million, covering both water and sewerage activities. To date, variable costs have been reduced by 20%. UU Contract Solutions gained the contract against six other bidders both in price and service delivery terms. In 2002, UUCS also gained a £15 million water meter installation and replacement contract. Scotland

1998 Fort William 28 year PFI BOT 14,000 sewage treatment 1998 Inverness 28 year PFI BOT 66,000 sewage treatment 1999 Tay 28 year PFI BOT 330,000 sewage treatment 2001 Moray Coast 30 year PFI BOT 70,000 sewage treatment

These contracts were awarded by the North of Scotland Water Authority to Catchment Ltd, with UU responsible for the operation of the sewage treatment works through Caledonian Water. The £45 million Highland scheme has two facilities, at Fort William and Inverness, which are both fully operational. The Tay scheme (33% held by UU) is for a single site serving Dundee and Angus and entered service in March 2002 at a total cost of £150 million. The £60 million scheme for the Moray Firth involves three sewage treatment works and 25km of sewerage for the Moray Firth. In addition, UU’s Scottish Water Solutions gained a contract in 2004 to manage £1.1 billion of Scottish Water’s £1.8 billion 2001-06 capital spending programme. £160 million in work has been delivered to date. International activities United Utilities International Ltd. (UUI) is the 100% held international water contracts arm of UU. After a number of major contract gains by UUI (as North West Water International) in 1993 and one in 1994, it entered into a JV with Bechtel. In 2003-04, International Water sold its stakes in the Bulgarian, Philippine, Polish and Estonian operations back to UU and other parties. UU remains one of the leading UK water companies for international contracts. The company has gained a reputation for aggressively cutting back at capex demands while meeting compliance targets. The company ought to be regarded as one of the five leading global competitors in water and sewerage privatisation projects. UU’s current target markets are the UK, central and eastern Europe and Australia. United Utilities Plc, number of people served in the UK and internationally

Country Water Sewerage Total England 6,840,000 6,880,000 6,880,000 Wales 2,788,000 3,043,000 3,043,000 Scotland – PFI 0 480,000 480,000 Poland 300,000 300,000 300,000 Estonia 405,000 405,000 405,000 Bulgaria 1,200,000 1,200,000 1,200,000 Kuwait 0 1,900,000 1,900,000 Ecuador 2,500,000 1,730,000 2,500,000 Philippines 3,400,000 500,000 3,400,000 Australia 500,000 0 500,000 India 1,600,000 0 1,600,000 Total - home market 9,628,000 10,323,000 10,323,000



Country Water Sewerage Total Total - international 10,405,000 6,035,000 11,805,000 Grand total 20,023,000 16,358,000 22,128,000

Poland

1999 Biesko Biala 12 year concession 300,000 water and wastewater In November 1999, UUI and International Water entered into a strategic partnership with the municipality of Biesko Biala and acquired 33% of Aqua SA, the utility providing water and wastewater services to the city (200,000) and surrounding area. The privatisation is being supported by the World Bank. UUI currently holds 25% of Aqua SA. Estonia

2000 Tallinn 15 year concession 405,000 water and wastewater The total contract is worth US$700 million. UU and IW bid KR1,338 million (US$75.6 million) for a 50.4% stake in AS Tallina Vesi. The city of Tallinn also holds a single Golden Share. UU now holds 38% of AS Tallina Vesi. There will be 15% price increases in 2004 and 2005. The emphasis is on developing a municipal and stormwater sewerage and effluent treatment system. The contract involves KR3.98 billion in capex over 12 years, including sewerage and stormwater systems in operation by 2006. Bulgaria 1999 Sofia 25 year concession 1,200,000 water and wastewater UUI and International Water were awarded the concession in December 1999. The winning bid was based on fees of US$152 million against US$239-273 million tendered by Suez and Berlin Water and US$66 million in capex in the first three years, against US$59-64 million by the same companies. US$200 million will be invested in the city’s infrastructure over the life of the concession. The contract is worth £700 million over its life. UU holds 60% of Sofiyska Voda. Australia UU serves a total of 500,000 people via 12 water treatment facilities and two industrial wastewater treatment projects. These have been carried out in both cases as a JV with Australia’s Transfield Group, with 50% of the equity held by UU Australia. UU has indicated that it is keen to acquire one or more of the Australian water and sewerage entities that are currently being mooted for privatisation.

1993 Melbourne 25 year BOOT 300,000 water This was the first BOOT project in the Australian Water industry, involving the renovation of Yan Yean reservoir, the oldest in Victoria, particularly during summer months when demand is high. A new direct filtration plant has replaced existing basic treatment facilities and now has a capacity of 155,000Ml/day. It can reach a population of over 300,000 and supply 100,000 of these people at any one time. After A$25 million in spending, the refurbished facility entered service in 1994.

1994 Sydney 25 year BOOT 230,000 water The Build, Own, Operate, and Transfer (BOOT) contract was awarded in 1992. It involved the construction of a new water treatment works costing A$124 million. The plant was commissioned in September 1995 and provides a population of 230,000 people with up to 265Ml of water per day.

1996 Adelaide 25 year BOOT 154,000 water UU won the Adelaide BOOT contract for water treatment in South Australia’s Riverland region in 1996. The A$115 million BOOT for 10 water treatment plants serves over 150,000 people in 90 communities. The consortium is made up of UU (50%) and AMP (Australia, 50%). Construction was from 1997-99, and the facility entered into service in September 1999. In May 2000, UU Australia signed a £40 million 20 year DBO contract with Queensland Nickel for a wastewater treatment plant designed to recover nickel from process water. In September 2000, UU announced that it is seeking to develop an underground lake discovered by Anaconda Nickel Ltd of Perth in the Western Desert. The lake is estimated to hold 2,000billion litres of water. It is located in the Officer Basin, 400km from the mining area of Kalgoorie. The water is suitable as industrial water or could be treated for human consumption.



India

2003 Tirupur 30 year BOT 1.6million water treatment This is the first large scale private sector water provision project in India. It was awarded to UU Australia and Bombay’s (Mumbai's) Mahindra and Mahindra Ltd, serving the capital of Tamil Nadu. This involves the construction of a 185 Ml/day water treatment plant, pipeline, service reservoirs and a wastewater treatment plant and pumping stations. The WTP is expected to enter service in 2005 and will provide water for the textile manufacturers and over 1.6million residents in the Tiripur municipal area and surrounding villages. Philippines

1997 Eastern Manila 25 year concession 3.4million, water & sewerage UUI (19.9% stake) gained the contract for the eastern zone of Manila’s Metro Manila Water and Sewerage System (MWSS) together with Alaya of the Philippines (51.1% stake), and Mitsubishi (11.35%), BPI Capital (11.35%) and employees (6.3%). This is the richer half of the city including the Makati financial district. US$2.5 billion is to be invested in the eastern zone over 25 years, which serves 4.6million people. Households which are connected to the sewerage system pay an extra 50%. Manila Water, profit and loss account

FY 31/12 (PHP million) 2001 2002 2003 Water sales 1,180.0 2,111.0 3,062.3 Environmental charges 118.1 209.5 305.9 Sewer charges 78.4 121.3 198.6 Total revenues 1,643.6 2,682.5 3,777.9 Net Income 161.1 558.4 1,150.5

Water supply in 2004 is running at a peak of 780million L/day. Since the concession started, 140,000 leaks have been repaired, saving 250 Ml/day of water. Currently 9% of people and 11% of households are connected to the sewerage system, and only 0.1% of households have actual wastewater treatment. The company has rehabilitated the Magallanes wastewater treatment plant which processes up to 40million L of wastewater per day. It is also constructing 27 sewage treatment plants across the area.

Water services 1997 2003 Cost of water (P per m3) 10.70 5.55 Compliance with drinking water standards 91% 100% Non-revenue water 63% 48% Households served 325,000 515,000 Water delivery (million L/day) 440 756 Delivery 24 hours/day 26% 83%

Manila Water currently supplies 515,000 households, 1million more people than in 1997. 600,000 people in low income areas have been connected to piped water supplies since 1997 through the company’s ‘Tubig Para Sa Barangay’ programme and a further 100,000 are expected to be connected during 2004. P9 billion was spent between 1997 and 2003 and a further P10 billion is budgeted for 2004-2008. Non revenue water is to be eased to 43% by 2007. Manila Water plans an IPO in 2005. The company is currently considering seeking new contracts outside its original territory. Ecuador 2001 Guayaquil 30 year concession 2.5million water & wastewater

The concession wil l serve 2.5million people in the commercial city. ECAPAG has 250,000 customers, and made a US$1 million operating profit in 2000. US$1 billion will be spent on infrastructure over the contract’s life, including service extension. Previously, ECAPAG suffered from underfunding to cover costs and expansion. IW will hold 90% of ECAPAG, which currently provides water to 65% of the city’s inhabitants, and 1,730,000 with sewerage. 55,238 new connections are planned in the first five years, when US$120 million in capex is planned.



Kuwait 2001 Sulaibiya 30 year BOT 1.9million sewage treatment

Utilities Development Co, (Ionics, Bechtel & United Utilities) will be responsible for the build-operate- transfer deal. The project is expected to be worth more than US$1 billion over its life, and aims to produce some 375,000 cubic metres of water per day in its first phase. It involves US$415-450 million in capex. The National Bank of Kuwait (NBK) is arranging a 110 million Dinar (US$358 million) loan and Kharafi and Ionics are expected to put up the rest of the funds. The facility’s capacity implies that it may be intended to serve the entire population of 1.9million. Contact Details Name: United Utilities Plc Address: Dawson House,

Great Sankey, Warrington WA5 3LW, UK

Tel: +44 1925 237 000 Fax: +44 1925 237 073 Web: www.unitedutilities.com Sir Richard Evans (Chairman) John Roberts (Group Chief Executive) Simon Batey (Group Finance Director) Gordon Waters (MD, UUCS)

USA PART 3: COMPANY ANALYSIS


UNITED STATES OF AMERICA ALLIANCE WATER RESOURCES Alliance Water Resources (AWR) is a privately held company operating in midwestern USA and employing 200 staff. The company was founded in 1976, and over the past 25 years, has operated in excess of 100 water and wastewater treatment facilities. Currently, it serves some 230,000 people through O&M contracts at facilities with an asset value of US$150 million. Activities by client category

Commercial & industrial 10% District 30% Municipal 60%

Contracts serving 20 towns and districts are currently under management. These provide water and wastewater services to 272,800 people in the states of Missouri and Iowa.

Bowling Green, MO Water & wastewater (municipal, 1994-) 3,000 Cameron, MO Wastewater (municipal, 1990-) 11,500 Cape Girardeau, MO Water (municipal, 1992-) 37,500 Elsberry, MO Water & wastewater (municipal, 2000-) 2,000 Fredericktown, MO Wastewater (municipal, 1999-) 4,000 Fulton, MO Water & wastewater (municipal, 1992-) 12,100 Lake Ozak, MO Wastewater (municipal, 1999-) 10,000 Lexington, MO Wastewater (municipal, 1993-) 5,000 O’Fallon, MO Water & wastewater (municipal, 1993-) 55,000 Maquoketa, Iowa Water & wastewater (municipal, 2001-) 6,100 Tipton, Iowa Water & wastewater (municipal, 2002-) 4,000 Parkville, MO Wastewater (municipal, 1999-) 3,000 Buchanan Co, MO Water (district, 2001-) 2,500 Franklin Co, MO Water & wastewater (district, 2001-) 7,000 Henry Co, MO Water (district, 1983-) 9,500 Henry Co, MO Water (district, 2002-) 3,000 Lincoln Co. MO Water & wastewater (district, 1995) 8,100 Platte Co. MO Water (district, 2002) 4,000 Ralls Co. MO Water & wastewater (district, 2001) 2,500 St Charles’ Co, MO Water & wastewater (district, 1980-) 80,000

Alliance Water Resources revenue breakdown

Y/E 31/12 US$ million 1999 2000 2001 2002 Municipal O&M 9.75 11.20 12.50 14.00 Industrial O&M 0.00 0.05 0.08 0.08 Total 9.77 11.25 12.58 14.08

Source: Public Works Financing, March 2001, 2002 & 2003 Contact Details Name: Alliance Water Resources Address: 206 South Keene Street

Columbia, MO 65201

Tel: +1 573 874-8080 Fax: +1 573 443-0833 Web: www.alliancewater.com



AMERICAN STATES WATER American States Water (AWR) was founded in 1929 and floated in 1998 as a listed vehicle for Southern Californian Water Company (SCW), a utility company engaged principally in the purchase, production, distribution and sale of water. SCW operates in three regions, serving 75 communities in 10 counties in the state of California and provides water services in 21 customer service areas. Approximately 73% of SCW's water customers are located in the greater metropolitan areas of Los Angeles and Orange County. SCW also provides electricity services to the city of Big Bear Lake and surrounding areas in San Bernardino County. Combined revenues derived from commercial and residential water customers accounted for approximately 91% and 93% of total water revenues in 1998 and 1997, respectively. SCW served 250,082 water customers (1 in 33 Californians) at the end of 2003. AWR is expanding through a series of local acquisitions in California and other states. In December 1999, AWR sought to acquire Peerless Water, a company serving 1,900 customers in Bellflower, California. Regulatory clearance was anticipated by the end of 2001. In October 2000, AWR acquired Chaparral City Water Company (CCWC) from MAXXAM Inc. for US$31.2 million, less outstanding debt. CCWC provides water to 12,100 customers in the towns of Scottsdale and Fountain City in Arizona. AWR, profit and loss account

Y/E 31/12 (US$ million) 2002 2003 SCW 248,511 250,082 Water customers: CCWC 11,834 12,000 SCW 180.90 181.0 CCWC 6.16 6.22

Turnover:

ASUS 0.85 1.01 SCW 46.97 46.00 CCWC 1.75 0.48

Operating profits:

ASUS -2.30 0.54

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Water 159.7 168.8 181.5 187.1 187.2 Electricity 13.4 14.4 15.3 21.3 24.5 Group turnover 173.4 184.0 197.5 209.2 212.7 Operating income 28.5 32.3 37.7 37.6 33.6 Interest paid -12.9 -14.1 -15.7 -17.7 -18.1 Net income 16.0 19.9 21.4 20.4 11.9 Earnings per share (US$) 1.19 1.23 1.33 1.34 0.78 Dividends per share (US$) 0.85 0.86 0.87 0.87 0.88

The company’s American States Utility Services (ASUS) provides outsourcing, billing and meter reading services to a further 97,000 non-regulated customers in California and Arizona. This includes 33,000 customers in the city of Torrance, CA whose services were outsourced to ASUS in 2000. In July 2004 ASUS gained an agreement to own, operate and maintain the water and wastewater systems at Ft. Bliss, located near the City of El Paso, Texas, through a wholly-owned subsidiary, Fort Bliss Water Services Company. Revenues for the contract are estimated at more than US$196 million over its 50-year period and are subject to periodic price re-determination adjustments and adjustments for changes in circumstances. Contact Details Name: American States Water Company Address: 630 East Foothill Boulevard,

San Dimas, CA 91773 USA

Tel: (909) 394-3600 Fax: (909) 394-0711 Web: www.aswater.com Lloyd E. Ross (Chairman) Floyd E. Wicks (President/CEO) Robert J Sprowls (SVP/CFO) McClellan “Bud” Harris III (SVP, AS Utility Services)



AQUA AMERICA INC Philadelphia Suburban Corporation (PSC) was incorporated in 1968 and is the second largest investor-owned water utility in the USA, serving over 2.5million people. PSC owns the Philadelphia Suburban Water Company (PSW) and the Consumers Water Company (CWC). PSW supplies water to approximately 383,000 residential, commercial, industrial and public customers in a service territory of 481 square miles in the suburban area west and north of the City of Philadelphia, serving 1.3million people excluding 6,000 customers served by an O&M contract. As the company has subsequently expanded into 13 other states, which now account for 40% of revenues, PSC changed its name to Aqua America in January 2004. Tuck-in acquisitions (US$ million)

Year Number Consideration Turnover added Customers 1997 4 1.23 0.36 1,700 1998 5 25.38 4.69 9,007 1999 16 39.16 4.90 17,250 2000 18 11.84 2.63 14,418 2001 20 14.88 4.74 25,550 2002 25 11.66 2.92 9,175 2003 17 1.61 0.31 NA

US$270 million has been spent on acquisitions between 1999 and 2003. Since the start of 1996, PSW has acquired 130 local water systems and three wastewater utilities in areas adjacent to its current operations. These have added in excess of 120,000 customers to AA’s original activities. In March 1999, PSC acquired the CWC for 13.01million shares, valuing the company at US$463 million. CWC serves approximately 232,000 customers (700,000 people) in service territories covering parts of Pennsylvania, Ohio, Illinois, New Jersey and Maine. Agreed bids for AquaSource, Florida Water and Heater Utilities, aborted bid for Pennichuck In July 2002, PSC launched an agreed bid with DQE to purchase AquaSource. The US$190.7 million bid was completed in July. AquaSource has approximately 130,000 customers in 600 operating systems along with 40,000 O&M customers. Most of these customers are in Texas, Florida (21,000 custom ers), Virginia, Indiana, North Carolina, New Jersey and Missouri with a smaller number of customers in five other states. In June 2004 AA acquired ALLETE’s North Carolina-based water and wastewater systems, Heater Utilities, Inc., for US$48 million in cash and the assumption of approximately US$28 million in debt. Heater Utilities was formed in 1964 was acquired by ALLETE’s Minnesota Power Corporation in 1987. Heater Utilities serves 50,000 customers, 45,000 for water and 5,000 for wastewater services through 245 water and 15 wastewater systems. In July 2004, AA completed the acquisition of 63 water and wastewater systems from ALLETE’s Florida Water Services Corporation for a total of US$13.8 million. The agreed bid for Pennichuck in May 2002 was worth US$79 million along with the assumption of US$27 million of debt. The bid was terminated in February 2003 when a referendum in Nashua, New Hampshire sought to authorise the municipal acquisition of Pennichuck. AA, geographical split of turnover

31/12/2003 Revenues

Customers

Pennsylvania 60% 400,000 Ohio 9% 84,000 Illinois 7% 64,000 Texas 7% NA New Jersey 5% 133,000 Virginia 4% 70,000 Florida 3% 100,000

Other states include Maine (16,900 customers), Indiana (1,500 customers), Missouri (4,000 cus tomers) and North Carolina (25,000 customers). These figures are for the final quarter of 2003, and reflecting the contribution made by AquaSource’s activities. Further changes are anticipated on the integration of the ALLETE activities by the end of 2004.



AA, profit and loss account (including the CWC acquisition)

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Residential 154.88 170.60 188.30 197.19 218.49 Commercial 45.19 47.11 53.10 55.96 61.34 Industrial 13.94 14.94 16.14 17.21 17.68 Other water 32.00 29.58 35.68 36.26 40.05 Wastewater 5.24 5.41 6.96 8.21 17.87 Utility revenues 251.25 267.65 300.18 314.84 355.42

Group turnover 257.33 275.54 307.28 322.03 367.23 Net income 36.38 52.89 60.11 67.15 70.79 Earnings per share (US$) 0.45 0.65 0.70 0.78 0.79 Metered customers Residential 497,937 512,442 526,776 535,506 624,355 Commercial 29,241 29,317 29,745 30,355 33,015 Industrial 1,430 1,446 1,454 1,423 1,397 Other 9,067 9,500 9,947 16,466 20,483 Wastewater 11,262 12,441 19,615 21,724 70,421 Total – regulated 548,937 556,146 587,537 605,474 749,491 O&M Contracts 8,525 14,073 14,973 21,312 Total 557,462 565,146 602,510 626,786

Veolia Environnement sold its 17% holding in PSC in September 2002. In December 2002, as a result of the settlement of a condemnation action, the Ohio operations were sold to Ashtabula County for $12.2 million, with a net after-tax gain of $3.7 million. PSC is continuing to operate this water system for Ashtabula County under a 1 year operating contract that should provide over $300,000 in operating revenues in 2003. Contact Details Name: Aqua America Inc Address: 762 Lancaster Avenue,

Bryn Mawr PA 19010 USA

Tel: +1 610 525 1400 Fax: +1 610 645 1061 Web: www.aquamerica.com Nicholas DeBenedictis (Chairman/President/CEO) David P. Smeltzer (SVP - Finance/CFO) Richard D Hugus (Regional President, AA South) Karl M Kyriss (President Aqua Pennsylvania) Robert G. Liptak (Regional President, AA North)



ARTESIAN RESOURCES CORPORATION Artesian Resources Corporation (ARC) is the parent holding company of Artesian Water Company, Inc. (AWC). AWC was founded in 1927 as the successor to the Richardson Park Water Company, founded in 1905. In 1984, the company was renamed Artesian Resources Corporation and the utility assets were vested to a newly formed subsidiary, Artesian Water. In 2003, Artesian had 69,726 metered customers (68,049 in 2002) and served a population of approximately 230,000, representing approximately 29% of Delaware's total population, a 32% increase since 1991). Artesian also has 39 customers in Pennsylvania. Since 1993, Artesian has added to its service territory by acquiring exclusive service areas in Delaware. This expansion, which has occurred in southern New Castle, Kent and Sussex Counties, has increased the exclusive service area in Delaware by approximately 40% since 1993. In 1998, ARC acquired the rights to provide water to two municipalities and neighbouring developments in Sussex County providing it with the opportunity to serve approximately 10,000 new customers by 2005. This area has accounted for 38% of ARC’s customer growth since 1998. Artesian also entered into agreements in 1998 to supply water to two municipalities in New Castle County. In 2003, residents in Broad Run Ridge, Pennsylvania were connected to the Delaware system. The company has also identified a number of wastewater treatment opportunities. Artesian Water, revenue by customer class

Revenue by customer class 2000 2001 2002 2003 Residential 59.64% 60.28% 59.57% 59.83% Commercial 25.67% 24.80% 23.83% 24.00% Industrial 0.75% 1.25% 1.31% 0.88% Government and other 12.27% 11.71% 12.54% 12.17% Other water revenues 1.51% 1.60% 1.92% 2.05% Non-utility operating revenues 0.16% 0.36% 0.83% 1.07% Total 100.00% 100.00% 100.00% 100.00%

Domestic usage increased from 3,627million gallons in 2002 to 3,650million gallons in 2003. Commercial usage increased by 1million gallons to 2,167million in 2003 while industrial water sales decreased by 47.1% to 117million gallons in 2003. Artesian Wastewater Management, Inc. (AWM) was created in 1996 as a non-regulated subsidiary to provide wastewater treatment services in Delaware. In 1997, Artesian Wastewater became a one-third participant in AquaStructure Delaware, LLC, which intends to develop and market various proposals to provide wastewater treatment services. Two wastewater treatment plants serving 10,000 customers in Middletown entered service in 2002. These contracts have a 20 year term, which can be extended by an additional 20 years. The contract generated revenues of US$0.4 million in 2003. AWM had 15 contracts in operation during 2003, compared with 4 in 20001. ARC, profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover 26.78 27.55 31.36 34.60 36.30 Operating income 6.09 6.21 7.40 8.18 8.53 Net income 2.91 2.39 3.27 4.17 3.92 Earnings per share (US$) 0.99 0.79 1.07 1.17 0.99 Dividends per share (US$) 0.71 0.73 0.74 0.77 0.80 Utility plant at cost 149 163 184 202 224 Rate base 77 88 99 115 132

Contact Details Name: Artesian Resources Corporation Address: 664 Churchman’s Road,

Newark, DE 19702

Tel: (302) 453-6900 Fax: (302) 453-5800 Web: www.artesianwater.com Dian C. Taylor (Chairman/President/CEO) David B. Spacht (Vice President/CFO/Treasurer)



BIW LTD. BIW Ltd. (BIW) is the holding company for Birmingham Utilities (BU). The BIW provides water to the towns of Ansonia, Derby, Connecticut and parts of the town of Seymour. It changed its name from Ansonia Derby Water Co in 1993. BU served 11,270 customers in 2003, 97% residential and commercial. In 2003 the company had an average daily demand of 3.2million gallons and a peak demand of 4.2million gallons. BIW can deliver a safe daily yield of 8.0million gallons per day. BIW, operating statistics

Year Water delivered (billion gallons)

Customers Commercial & domestic turnover

1998 1.18 8,902 94% 1999 1.25 8,990 94% 2000 1.25 9,062 94% 2001 1.28 9,114 97% 2002 1.24 9,114 97% 2003 1.23 11,270 97%

In July 2002, approval was gained for the establishment of a new holding company BIW Ltd. BIW Ltd. will continue to conduct BU's current businesses through Birmingham Utilities Inc. The new name is designed to allow the company to develop BIW Ltd. to exploit non-regulated activities in the water sector. These are managed under the name of Birmingham H2O Utilities Ltd. In 2003, Birmingham H2O Utilities Ltd. accounted for 8% of group turnover. In October 2003 Philadelphia Suburban sold AquaSource’s regulated (Eastern Connecticut Regional Water Company, Inc has 2,100 customers) and non-regulated activities in Connecticut to BIW for US$4.65 million. These activities contributed US$0.42 million in revenues during 2003. A further acquisition of five small regulated water companies serving approximately 1,000 customers in eastern New York for US$1 million was agreed in 2003 and regulatory approval is anticipated by the end of 2004. BIW, profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover – regulated 4.62 4.50 4.62 4.49 5.43 Turnover – non-regulated 0.00 0.00 0.00 0.35 0.98 Total turnover 4.62 4.50 4.62 4.84 6.41 Operating profits 0.89 1.20 1.13 0.98 1.25 Land sales 0.00 0.13 5.13 0.26 0.00 Net income 0.92 0.70 5.66 0.82 0.82 Earnings per share (US$) 0.59 0.44 3.41 0.49 0.49

BIW has some 1,400 acres of land covering watershed areas to protect the quality and purity of its water. Since 1988, the Company has sold all of its 2,325 acres of land in Bethany, Ansonia, Derby, Seymour and Oxford identified as surplus to requirements, realising net gains of US$13,085,806. Contact Details Name: BIW Ltd Address: 230 Beaver Street, Ansonia,

CT 06401 USA

Tel: (203) 735-1888 Fax: (203) 735-1911 Betsy Henley-Cohn (CEO and Chairman) John S. Tomac (CFO and President)



CADIZ INC. Cadiz Inc. (Cadiz) is involved in the development of water and agricultural resources, as well as selected water-related technologies. Cadiz has created a portfolio of assets encompassing undeveloped land with groundwater resources in central and southern California with secure and reliable water rights that are situated near to the state’s aqueduct system. In 1996, Cadiz acquired Sun World International Inc (Sun World), one of the largest agricultural companies in California. The company holds 35,000 acres in the Cadiz Program area along with 9,000 acres in Piute Valley and 2,000 acres in Danby Lake. The latter two are supplementary to its main programme. In 1997, Cadiz entered into an interim agreement with the Metropolitan Water District (MWD) of southern California to develop a 50 year agreement for the Cadiz Groundwater Storage and Dry-Year Supply Program. The Program will enhance southern California’s water supply reliability by providing a new dry-year water supply and new storage capacity. The infrastructure for the water transfer will cost US$150 million (over the contract period) and will allow the district to store up to 500,000 acre-feet of water in wet years and to transfer up to 1.1million acre feet from Cadiz’s holdings during dry years. The first 400,000 acre-feet will be purchased by the MWD for US$92 million. The total value of the contract has been estimated at US$1 billion. An agreement drawn up in 1993 with the San Bernardino County Board of Supervisors allows for the withdrawal of more than 1million acre-feet of groundwater from the Company's underground water basin. In August 2002, the US Department of the Interior supported the proposals, but in October 2002, the MWD’s final vote rejected the water-storage project and no subsequent progress has been made. Cadiz Inc., profit and loss account

Y/E 31/12 (US$ million) 1998 1999 2000 2001 Turnover – Sun World 106.54 115.23 107.75 92.40 Litigation recovery 0.00 0.00 0.00 7.93 Total turnover 106.54 115.23 107.75 100.33 Net income -7.47 -8.59 -22.46 -25.72 Earnings per share (US$) -0.23 -0.25 -0.64 -0.75

In January 2003, Sun World was placed under Chapter 11 protection because of the need to refinance some US$40 million in debt. In March 2003, the shares of Cadiz were delisted and it was announced that the company has not subsequently been in a position to disclose its 2002 or 2003 results. In 2003, US$35 million of senior debt was refinanced and US$10.8 million raised from two equity placings. Cadiz is seeking to divest Sun World and the company’s associated US$115 million in debt. Contact Details Name: Cadiz Inc Address: 100 Wilshire Boulevard,

Suite 1600, Santa Monica, CA 90401 USA

Tel: +1 310 899 4700 Fax: +1 310 899 4722 Web: www.cadizinc.com Keith Brackpool (Chairman, President and CEO) Mark A Liggett (Senior Vice President)



CALIFORNIA WATER SERVICE CO. The California Water Service Company (CWSC) was formed in 1926, and was transformed into a holding company in 1997. The company is the largest investor-owned water company in California and the fourth largest in the USA, serving 1.7million people with water and wastewater and providing water meter reading for a further 175,000. 6,800 new customers were gained in 2003, compared with 8,600 in 2002, 6,120 in 2001 and 5,200 during 2000. CWSC provides water and wastewater services to 466,400 residential, commercial and industrial customers in regulated contracts in California, New Mexico, Washington and Hawaii and 107,700 customers through unregulated water activities. These regulated contracts are mainly in the San Francisco Bay, Sacramento Valley, Salinas Valley, San Joaquin Valley and Los Angeles . Due to the shortage of water in its operating area, 49% of water supplied by the company has been purchased from third parties in recent years. In addition, after the May 2003 acquisition of Kaanapali Water Corporation, CWSC renamed the company Hawaii Water, which provides water service to 500 customers on the island of Maui, including several large resorts and condominium complexes. Customer base, 2002

California New Mexico Washington Total * Regulated 447,100 2,400 14,700 464,700 Regulated – sewerage 0 1,700 0 1,700 O&M 35,300 0 3,900 39,200 15 year lease 6,100 0 0 6,100 Meter reading 13,400 49,000 0 62,400 Total 494,700 53,100 18,600 566,400

* Includes Hawaii Water Rio Grande Utilities Corporation (Rio Grande) was acquired in 2001 (approval gained in 2002) for US$2.3 million, with US$3.1 million in assumed debt. Rio Grande has annual revenues of US$1.2 million. In May 2000, CWSC merged with Dominguez Services Corporation (DSC), a water provision company serving 150,000 people in the Los Angeles area. DSC’s main holding is the Dominguez Water Company (32,637 cus tomers, 120,000 people in 18 communities in the Carson/Torrance area of Los Angeles County), along with 3 smaller subsidiaries; the Kern River Valley Water Company (1,271 customers), the Antelope Valley Water Company (4,096 customers) and Redwood Valley Water Company (1,912 customers). In addition, DSC Investments generates revenues from the transfer of water rights between third parties. DSC had revenues of US$28.5 million in 1999. California Water Service Co., profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003

Residential 163.68 171.23 173.82 184.89 194.90 Business 41.25 44.21 44.94 46.40 49.67 Industrial 12.70 11.01 9.91 11.04 11.26 Public authorities 10.90 11.61 11.86 12.71 12.79 Other customers 6.42 6.74 6.29 8.10 8.52 Group turnover 234.94 244.81 246.82 263.15 277.13 Net income 21.97 19.97 14.97 19.07 19.42 Earnings per share (US$) 1.44 1.31 0.97 1.25 1.21 Dividend per share (US$) 1.09 1.10 1.12 1.12 1.13

Contact Details

Name: California Water Service Group Address: 1720 North First Street,

San Jose, CA 95112 USA

Tel: +1 408 367 8200 Fax: +1 831 427 9185 Web: www.calwater.com Web: www.dominguezh2o.com Robert W. Foy (Chairman) Peter C. Nelson (President/CEO) Richard D. Nye (CFO)



CH2M HILL CH2M Hill is an em ployee-owned civil engineering company. It was founded in 1946 by Messers Cornell, Howland, Hayes & Merryfield who in turn merged with Claire A Hill Associates in 1971. The company employs 14,400 staff. In Puerto Rico, CH2M Hill was involved in the design and upgrading or construction of 600 water and wastewater facilities as part of a US$2.1 billion investment completed by 2003. Other international projects include advanced effluent treatment at a number of coastal cities in Australia and New Zealand. CH2M Hill

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover 1,570 2,107 2,338 2,433 2,597 OMI turnover 110 123 148 175 NA

Operations Management International (OMI) As the name suggests, OMI specialises in water and wastewater O&M contracts for municipal and industrial clients. The company was founded by CH2M Hill in 1980. OMI currently operates 170 water and wastewater facilities, against 150 in 1999 and has 1,394 staff. It is estimated that the company serves 3.5million people and is the second largest O&M player in the USA. OMI major contracts

2001 Seattle, WA 25 year DBO Water treatment 2002 Sandy, Oregon 5 year O&M Wastewater treatment 2002 Genoa, Michigan 3 year O&M Water & wastewater treatment 2002 Rio Rancho, NM 5 year O&M Water & wastewater treatment 2002 Stockton, CA 20 year O&M Water & wastewater treatment 2003 Havana, Florida 3 year O&M Wastewater treatment 2003 Fort Campbell, KY 50 year O, O&M Water & wastewater treatment

The Fort Campbell contract covers all the ownership and all operations for the 101st Airborne Division’s headquarters, covering 3,000 buildings and 4,000 housing units, with a 7.6million gallon per day water treatment plant and a 4.0million gallons per day wastewater treatment plant. The total contract is worth US$700 million. In Seattle, the new Cedar Treatment Facility will provide 70% of the water used by the city’s 1.3million people and will save Seattle US$50 million over the life of the contract. The water treatment facility is expected to be operating by the end of 2004 and will cost US$109 million to design, build and operate for 25 years. The Stockton contract was awarded to OMI joint venture with Thames Water (RWE) and is intended to save the city US$65 million in engineering fees and US$110 million in other operational costs. OMI, O&M outsourcing turnover in the USA

Y/E 31/12 (US$ million) 2000 2001 2002 Municipal 139.4 151.0 190.0 Industrial 15.0 25.1 27.1 Total 154.4 176.0 217.0

Source: Public Works Financing, March 2002 & 2003 International DBO contracts include Ra'anana (Israel, wastewater treatment), and Cavite (Philippines, bulk water supply), Fort Saskatchewan, Alberta (Canada, 24million gallons per day wastewater treatment) and Taipei (Taiwan, 343million gallons per day wastewater treatment plant for 4million people). Contact Details Name: CH2M Hill Address: 9191 South Jamaica Street, Englewood CO, 80112, USA Tel: (303) 771 0900 Fax: (303) 286 9250 Web: www.ch2m.com Web: www.omiinc.com Ralph R. Peterson (Chairman and CEO) Samuel H. Iapalucci (CFO) Mark Lasswell (President, Water Business Group)



CONSOLIDATED WATER Consolidated Water Co. Ltd. (CWC) was incorporated as the Cayman Water Co in August 1973, to provide water services in areas where the supply of potable water is scarce. The company provides potable water from two reverse osmosis desalination plants in Grand Cayman Island to the most populated areas of Grand Cayman and a public water utility in parts of the Cayman Islands under a 20 year exclusive license from the Government of the Cayman Islands. The facilities produce a total of 1.8million US gallons of water per day. There are approximately 3,300 residential and commercial customers (hotels, condominiums etc.) served in the Cayman Islands. In total, there were 39,410 residents in the Cayman Islands in 1999, with 2.1million visitors during 2003. SeaTec Belize Limited was acquired in 2000. SeaTec has operated a desalination plant on Ambergris Caye in Belize, since 1996. This company has been renamed Belize Water Ltd. (BW). BW serves some 4,500 people in Belize. In addition, it has developed two desalination plants in the Bahamas that are providing water to leisure developments on those islands. The company is concentrating on projects on the two Bimini Islands, serving 1,600 people In February 2003, the CWC acquired a series of operations in the British Virgin Islands, Barbados the Bahamas and the Cayman Islands. The US$25 million package involves managing water treatment plants capable of desalinating 8million gallons of water per day. This also involved increasing the company’s stake in the Waterfields Co Ltd desalination plant in Nassau, Bahamas from 26.2% to 38.9%. In 2003, the capacity of the British Virgin Island facility was expanded from 1.2 to 1.7mil lion gallons per day. CWC Operations after the 2003 acquisitions (million gallons per day)

Location Plants Capacity Cayman Islands 6 5.3 Bahamas 2 2.7 Belize 1 0.4 Barbados 1 1.3 British Virgin Islands 1 1.7 Total 11 11.4

Breakdown of revenues

2002 2003 Retail Water 88% 57% Bulk Water 12% 37% Services 0% 6% Total 100% 100%

Retail Water covers the desalination and water distribution operations in the Cayman Islands and Bahamas, Bulk Water the operations in Belize, the Cayman Islands, Bahamas and British Virgin Islands and Services, the company’s engineering and management services. Consolidated Water Co. Ltd., profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover 8.2 10.0 11.3 12.2 19.1 Operating profits 1.9 2.4 2.6 2.6 4.0 Net profits 1.6 2.4 2.8 2.6 4.2 Earnings per Share (US$) 0.49 0.67 0.69 0.63 0.83

Contact Details

Name: Consolidated Water Co. Address: Trafalgar Place, West Bay Road,

Grand Cayman, Cayman Islands

Tel: (345) 945-4277 Fax: (345) 949-2957 Web: www.cwco.com Jeffrey M Parker (Chairman) Frederick W McTaggart (President and CEO) Brent J Santha (CFO)



CONNECTICUT WATER SERVICE COMPANY The Connecticut Water Service Company (CWS) was founded in 1956 as Suburban Water Service, Inc and has concentrated on acquiring and operating water companies through controlling stock ownership. Since 1969, the company has been selling off its excess real estate holdings. In 1975, the company changed its name to Connecticut Water Service Inc. after acquiring all of the outstanding Common Stock of CWS. In 1999 CWS established Connecticut Water Utility Services (CWUS) to handle the non-regulated business activities previously transacted by CWC, its regulated subsidiary. 80% of 2003 revenues were from the five regulated utilities. FY 2003 activities by operating company (US$ million)

Water Company Customers People served Revenues Connecticut 68,895 240,000 39.01 Barnstable 7,174 25,000 2.52 Unionville 5,762 20,000 2.58 Crystal 3,694 13,000 2.07 Gallup 1,225 4,000 0.64

CWS supplies water to 86,750 (78,692 in 2001) customers in three separate operating regions in 42 towns in Connecticut and Massachusetts. The service areas have a total population of 300,000. The population served increased by 20,000 during 1999, partly from the acquisitions of the Gallup Water Service Inc. and Crystal Water Utilities Corporation. In February 2001, CWS acquired Barnstable Holding Company for US$6.5 million. Barnstable owns the Barnstable Water Company, which serves 7,200 customers in Barnstable, Massachusetts. In December 2001, the company made a US$6.3million agreed bid for Unionville Water, a CT based company with 5,400 customers, or 14,000 people at the time. Connecticut Water Service Co., profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover Residential 27.08 26.07 28.62 28.68 29.17 Commercial 5.16 4.92 5.94 6.04 6.21 Industrial 1.85 1.91 1.69 1.71 1.62 Public Authorities 1.37 1.29 1.46 1.44 1.49 Fire & Non-Metered 7.16 6.88 7.68 7.43 8.62 Total turnover 42.62 41.51 45.39 45.83 47.12 Operating profits 11.23 11.16 11.31 11.83 11.53 Net income 7.46 7.93 8.40 8.74 9.17 Earnings per share (US$) 1.02 1.03 1.10 1.12 1.15 Dividends per share (US$) 0.79 0.80 0.80 0.82 0.83

Contact Details Name: Connecticut Water Service Address: 93 West Main Street,

Clinton, CT 06413

Tel: +1 860 669 8636 Fax: +1 860 669 9326 Web: www.ctwater.com Marshall T Chiaraluce (Chairman, President and CEO) D.C. Benoit (VP Finance/Treasurer) Terrance O'Neill (VP Operations)



COVANTA ENERGY CORP Covanta Water (CW) is the water O&M outsourcing arm of Covanta Energy Corp. (CEC), formerly Ogden Energy. In April 2002, the company filed for Chapter 11 protection. CE has withdrawn from a number of loss making project areas to concentrate on renewable energy generation and water provision. In December 2003, an agreed bid from Danielson Holding Corporation was agreed as a way of releasing Covanta from Chapter 11 status. This plan was accepted by the Bankruptcy Court in March 2004. Covanta Energy Corp, profit and loss account

Y/E 31/12 (US$ million) 2001 2002 2003 Revenue 917.6 628.2 619.1 Operating profit 90.5 53.7 61.3 Profit from continuing operations -205.6 -118.9 -30.4 Net income -231.0 -178.9 43.5 Earnings per Share (US$) -4.64 -3.60 0.87

CW has O&M contracts covering water provision and wastewater treatment facilities in three states. Cunningham Environmental Services serves six municipalities in New York state with a total treatm ent capacity of 17million gallons per day and a 50million gallons per day wastewater facility for Bristol Meyer Squibb. The main contract, for a 10million gallon per day wastewater treatment facility, was awarded in 1994 and renewed for 10 years in 1999. Bessemer Covanta has developed a US$56 million 24million gallons per day water treatment facility serving a suburb of Birmingham, Alabama in 1997. Covanta – Continuing water and wastewater management operations Location State Capacity Role Commencement Bessemer Alabama 24 mgd DBO 2000 Clinton New York 2.5 mgd Operator 1995 Bristol Myers Squibb New York 50 mgd Operator 2000 Chittenango New York 1.0 mgd Operator 1998 Canastata New York 2.5 mgd Operator 1998 Cortland New York 10 mgd Operator 1995 Mohawk New York 0.1 mgd Operator 1995 Kirkland New York 0.3 mgd Operator 1995 In 2000, the company was awarded a 20 year operating contract for the facility. In Tampa Bay, Florida, Covanta and Poseidon constructed a US$74 million 25million gallons per day desalination facility. This facility was completed in 2003, and its future status is currently under negotiation. Covanta Water, revenues

Y/E 31/12 US$ million 1999 2000 2001 Municipal 19.2 15.3 45.4 Industrial 0.0 0.3 0.0 Total 19.2 15.6 45.4

Source: Public Works Financing, March 2001 & 2002 (no information for 2002 available) Contact Details Name: Covanta Energy Corporation Address: 40 Lane Road,

Fairfield NJ 07004 USA

Tel: + 973 882 9000 Web: www.covantaenergy.com Anthony J Orlando (President and CEO) Craig Albot (CFO) William C Goldgate (VP, Engineering and Environmental)



MIDDLESEX WATER COMPANY Middlesex Water Company (MWC) is involved in wholesale and retail water supply for domestic, commercial, industrial and fire protection customers in New Jersey and Delaware, (with New Jersey being the main market). The company was incorporated in 1897 and operates water utility systems in central and southern New Jersey and in Delaware, as well as a wastewater utility in southern New Jersey. MWC serves approximately 375,000 people with water and 10,000 people with sewerage. The Middlesex System in central New Jersey produced 70% of the MWC's 2003 revenues, providing water to 58,000 retail customers, primarily in eastern Middlesex County, New Jersey, a population of 267,000. 7% of the Middlesex System’s water was purchased from RWE’s E’Town Water. The remaining 23% was obtained through groundwater. There are 6 further subsidiaries: [1] Tidewater Utilities Inc.; 24,000 retail customers in over 150 separate community water systems in Kent, Sussex and New Castle Counties, Delaware. Tidewater produced 15% of total 2003 revenues. [2] Pinelands Water Company services 2,400 residential customers in Burlington County, New Jersey. Pinelands produced 2% of total revenues in 2002. [3] Pinelands Wastewater Company services 2,300 primarily residential retail customers and, under contract, one municipal wastewater system in Burlington County, New Jersey with about 200 residential customers. Pinelands Wastewater generated 1% of total revenues in 2001. [4] Utility Service Affiliates Inc, along with MWC, started a 5 year contract with the City of South Amboy, New Jersey to operate and maintain the city's 2,600 customer water system in May 1995. The contract has been renewed to 2045. [5] Utility Service Affiliates (Perth Amboy) Inc, along with MWC, signed an agreement in 1998 with the city of Perth Amboy to operate and maintain the City's water and wastewater systems for its 9,300 customers for 20 years. USA-PA will be paid a fixed fee and a variable fee based on increased system billings. Fixed fee payments to USA-PA in the agreement rise from US$6.4 million in the first year to US$9.7 million by year 2020. 1999 was the first operational year of the contract, which generated 12% of group revenues in 2002. [6] Bayview has 300 customers in Cumberland County, NJ and accounted for less than 1% of group revenues. Middlesex Water Co., breakdown of turnover (%)

1999 2000 2001 2002 2003 Residential 36.9 37.9 38.4 40.0 39.4 Commercial 10.2 11.4 10.2 9.7 9.8 Industrial 12.1 15.8 12.6 11.9 11.1 Fire protection 10.2 11.5 10.4 10.5 10.7 Contract sales 15.6 17.5 14.8 14.1 13.2 Contract operations 14.0 12.6 12.2 12.1 12.6 Other 1.0 1.0 1.4 1.7 3.2

Middlesex Water Co., profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover 53.40 54.48 59.64 61.93 64.11 Operating profits 10.67 9.94 11.49 12.47 11.50 Net income 7.88 5.31 6.95 7.77 6.63 Earnings per share (US$) 0.76 0.50 0.66 0.73 0.61

Contact Details Name: Middlesex Water Company Address: 1500 Ronson Road, Iselin,

NJ 08830 USA

Tel: +1 732 634 1500 Fax: +1 732 750 5981 Web: www.middlesexwater.com Dennis G Sullivan (President and CEO) A. Bruce O'Connor (VP/CFO) Ronald F Williams (VP/COO)



PENNICHUCK CORPORATION Pennichuck Corporation (PC) owns three subsidiaries operating in southern and central New Hampshire. Pennichuck Water Works, Inc. (Pennichuck), Pennichuck East Utility Inc. (Pennichuck East) and Pittsfield Aqueduct Company Inc. (Pittsfield), provide drinking water to 26,800 residential and 2,000 commercial and industrial customers. The company was founded in 1983 to operate the assets of Pennichuck Water Works, which was first established in 1852. In addition, the Pennichuck Water Services Corporation provides O&M services to Hudson, New Hampshire. Overall, PC serves 130,000 customers in 23 towns and cities in New Hampshire. Pennichuck Corporation breakdown

FY 31/12/2002 (US$ million) Customers Revenues Pennichuck 24,200 15.25 Pennichuck East 4,450 2.98 Pittsfield 640 0.45

25% of Pennichuck’s water turnover comes from commercial and industrial customers and 57% from residential customers, the remainder coming from fire protection and other billings to municipalities (principally the City of Nashua). Non-regulated water contract operations generated revenues of US$1.70 million in 2003, against US$1.46 million in 2002. Pennichuck Corp., profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover 17.81 23.67 22.75 23.42 21.39 Net income 2.50 3.68 3.61 2.34 1.27 Earnings per share (US$) 1.12 1.55 1.50 0.98 0.52

In March 2002, Pennichuck was granted a 14.43% rate increase by the New Hampshire Public Utilities Commission (NHPUC,) bas ed upon an overall rate of return of 8.58% and an approved rate base of approximately US$43.1 million. Pennichuck East is authorised an overall rate of return of 8.37% on an approved rate base of approximately US$7.5 million. Pittsfield is authorised an overall rate of return of approximately 10% on an approved rate base of approximately US$1.6 million. Aborted bid by PSC and Municipal counter-bid Philadelphia Suburban Corp. (now Aqua America) made an agreed bid for Pennichuck in May 2002. The bid was abandoned in February 2003 when a referendum in Nashua, New Hampshire sought to authorise the municipal acquisition of Pennichuck. This process is still ongoing and in April 2004 Pennichuck started a legal action claiming US$5 million in damages over this. In May 2003, the town of Pittsfield voted to seek to acquire the Pittsfield Aqueduct Co, which was acquired by Pennichuck in 1998. The PSC bid cost Pennichuck US$1.95 million in legal and other fees. Contact Details Name: Pennichuck Corporation Address: Four Water Street, Nashua

NH 03061 USA

Tel: +1 603 882 5191 Fax: +1 603 882 4125 Web: www.pennichuck.com Donald L Correll (President and CEO) Charles J. Staab (VP, Treasurer and CFO) Stephen Densberger (Executive VP, Director)



PICO HOLDINGS INC The Physicians Insurance Company of Ohio (PICO) is a holding company specialising in the acquisition of apparently undervalued assets. The company seeks to develop a portfolio of water assets for sale to municipal and industrial clients. PICO Holdings Inc, profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover 34.67 9.68 23.56 29.27 32.88 Pre-tax profit -11.56 -7.29 3.78 1.11 -13.74 Net profit -9.74 -11.30 5.11 5.93 -3.24 Earnings per share (US$) -1.08 -0.97 0.41 0.48 -0.26

PICO entered the water rights market in 1995 through the acquisition of Vidler Water Co. Currently, Vidler controls water rights in Nevada (11,306 acre-feet plus applications for up to 100,000 acre-feet outstanding), Arizona (37,795 acre-feet plus 13,764 acre-feet under option) and Colorado (268 acre-feet, these operations are in the process of being sold off). Revenues are generated by the sale of land and water rights and from the selling of water to third parties. Nevada Land and Resource Company (NLRC) was acquired in 1996 for US$48.6 million. NLRC currently owns 5,582 acre-feet of water rights in Nevada and is applying for up to 105,506 acre-feet of additional water rights. In Arizona, the Vidler Arizona Recharge Facility has an estimated capacity of 1million acre-feet with an annual recharge capacity of 100,000 acre-feet. The Semitropic water storage facility in California holds the right to store 30,000 acre-feet of water until 2035, with an annual recovery of 2,700-6,800 acre-feet per annum. In March 2002, PICO sold 2,645 acre-feet of transferable ground water in Harquahala Valley, Arizona for US$1,450 per acre-foot. A further 480 acre-feet were sold in May 2002 for US$2,083 per acre-foot. Sales since 2001 have generated US$15.6 million in revenues and US$4.8 million in gross margins. In 2001, Vidler Water Company sold 83.8% of its original interests in the Semitropic Water Banking and Exchange Program for US$10.2 million, with a gross margin of US$5.7 million. Vidler sold 44,000 acres of land in 2003, generating US$14.8 million in revenues and US$4.6 million to gross margins. NRLC’s income derives from land sales and royalties. These markets fluctuate from year-to-year. To date NRLC has sold water rights worth US$894,000. Vidler and NRLC, profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Vidler Turnover 1.1 3.1 17.8 13.8 16.8 Pre-tax profit -3.9 -4.9 5.0 -0.9 -0.5 NRLC Turnover 7.1 5.3 3.2 4.4 5.9 Pre-tax profit 1.1 1.9 0.1 0.5 2.0

Vidler and NRLC aim to secure and develop water rights where needed for strategic municipal and industrial customers. These assets can then either be sold, leased or traded as market conditions permit. Vidler Water’s asset portfolio continues to be developed, especially in California. Contact Details Name: PICO Holdings Inc Address: 875 Prospect Street, Suite 301,

La Jolla, CA 92037-4264, USA

Tel: +(858) 456 6022 Fax: +(858) 456 6480 Web: www.picoholdings.com Web: www.vidlerwater.com Richard Langey (Chairman) John R Hart (President and CEO) Richard H Sharpe (COO) Maxim C. W. Webb (CFO)



PURE CYCLE CORP

Pure Cycle Corporation was founded in 1976 to provide water and wastewater services to customers located in the Denver metropolitan area. The Company designs, constructs, operates and maintains systems serving the customers. Water and wastewater services are provided to cities, municipalities and special districts. The Company also owns patented water recycling technologies capable of processing wastewater into pure potable drinking water. In 1996, the Company entered into a long-term agreement to provide water and wastewater services to the Lowry Range, a district with 24,000 acres of primarily undeveloped land in the greater Denver metropolitan area. The Company owns additional water assets in western Colorado known as the Paradise Water Supply, which it seeks to develop and market either to the greater Denver metropolitan area or in markets in the downstream states of Nevada, Arizona and southern California. In addition, Pure Cycle owns patented water recycling technologies, which are capable of processing wastewater into pure potable drinking water. During 2003, the District's engineers conducted an analysis of the available water supply and concluded the available supply is capable of providing a sustainable water supply for up to 100,000 single family equivalent homes. Development of the Service Area may take between 30 and 40 years to fully develop. The Service Area is located at the edge of the Denver metropolitan area and a small portion of the property has already been developed.

Y/E 31/12 (US$ 000) 2002 2003 Water usage revenues 156 156 Wastewater processing revenues 48 57 Other revenues 0 12 Total revenues 205 225 Pre-tax profit -50 -136 Net profit -245 -321 Earnings per share (US$) NA NA

In May 2004, Pure Cycle signed a long-term contract to provide water service to the Hills at Sky Ranch, a planned unit development in unincorporated Arapahoe County. Plans for the Hills at Sky Ranch provide for approximately 850 residences along with parks, open space and retail and commercial areas. The Hills at Sky Ranch is situated on 160 acres located about 8 miles south of Denver International Airport and adjoins the 760-acre, 4,000 dwelling unit Sky Ranch development to which the Company will also provide water service. Contact Details Name: Pure Cycle Corporation Address: 8451 Delaware Street,

Thornton, CO 80260, USA

Tel: +1 303 292 3456 Harrison H Augur (Chairman) Thomas P Clark (CEO) Mark W Harding (President and CFO)



SJW CORP SJW Corporation (SJW) was incorporated in California in 1985, serving what is now called Silicon Valley. It is a holding company with two wholly owned subsidiaries, San Jose Water Company and SJW Land Company. In addition, SJW also holds 1.10million shares in the California Water Service Group (CWSG). Altogether, 99% of revenues over the past 3 years have been generated by the water activities, while dividends from CWSG have contributed 7% of profits during the same period. The San Jose Water Company was incorporated in 1931, succeeding a business founded in 1866. The Company provides water to 990,000 people in an area of 138 square miles in the metropolitan San Jose area, an increase of 5,000 over the 2000 figure. Population growth within its service area has resulted in long term growth in its customer base. The company provides water services to customers in parts of Cupertino and San Jose and in the cities of Campbell, Monte Sereno, Saratoga, the town of Los Gatos, and the surrounding areas in the County of Santa Clara in California. 40-45% of SJW’s water is bought from third parties. In 2002, US$35 million was spent in refurbishing the water distribution system, compared with US$47 million in 2001. Some US$176 million has been budgeted for capital spending between 2004 and 2008. In October 1997, SJWC commenced operation of the city of Cupertino municipal water system under terms of a 25 year lease. The system is adjacent to the existing San Jose Water Company service area and has 4,200 customers. SJWC made a US$6.8 million lease payment to the city, which will be amortised over the lease term. The company is responsible for all aspects of system operation, including capital improvements. SJW Corp., profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover 117.00 123.16 136.08 145.65 149.73 Operating profit 19.74 17.93 19.83 20.56 22.95 Net income 15.88 10.67 14.02 14.23 18.68 Earnings per share (US$) 1.73 1.17 1.53 1.56 2.04 Dividends per share (US$) 0.80 0.82 0.86 0.92 0.97

American Water Works made an agreed US$390 million bid for SJW in October 1999. The bid was approved by SJW’s shareholders but was withdrawn in March 2001 after repeated delays from the Californian regulators in clearing the bid. In 2001, SJW was granted a 7.4% rate increase, with increases of 2.9% for 2002 and 3.1% for 2003, worth a total of US$15.9 million. Contact Details Name: SJW Corporation Address: 374 West Santa Clara Street,

San Jose, CA 95196, USA

Tel: +1 408 279 7800 Fax: +1 408 279 7934 Web: www.sjwater.com Drew Gibson (Chairman) W. Richard Roth (President / CEO) Angela Yip (CFO / Treasurer) C. J. Belhumeur (SVP, Operations)



SOUTHWEST WATER COMPANY Southwest Water Company (SWC) was incorporated in California in 1954 and reincorporated in Delaware on June 30, 1988. The company provides water and wastewater services and water meter reading services to some 2million people through 450 contracts for managing 460 water treatment plants and 200 wastewater treatment plants in 36 states, mainly California, New Mexico, Texas and Mississippi. The company has two operating groups; the Utility Group and the Services Group. Utility operations The Utility Group operates the company’s regulated water activities in California, New Mexico and Texas. Suburban Water Systems (SWS) operates in California, New Mexico Utilities Inc (NMUI) in New Mexico and Texas Utilities (TU) in Texas. The division currently serves 452,000 people. SWS was founded in 1907 and serves 311,000 people in Los Angeles and Orange County. The city of West Covina’s water system was acquired in February 2000 for US$8.5 million. This system has 7,000 connections and is near to SWS’s existing activities. Customer growth is limited to acquisitions and growth within its existing franchise. NMUI was acquired in 1969 and operates in Albuquerque and Bernalillo County, New Mexico, serving 40,000 people. Texas Utilities consists of the Windermere Utility Company and Hornsby Bend Utility Company (acquired for US$4 million in October 2000, based in the suburbs of Austin, with 6,081 connections serving 20,000 people) and 87 water utilities and 12 wastewater utilities acquired from Tecon Water Holdings for US$63 million in July 2004. The Tecon utilities currently serve approximately 21,000 water and 4,000 wastewater connections in Texas (80,000 people) and 250 water and wastewater connections in Oklahoma (800 people). Southwest Water Company, customer breakdown

Customers served 1999 2000 2001 2002 2003 SWS 67,153 74,483 74,665 74,846 75,027 NMUI 7,689 8,735 10,006 11,365 12,949 Texas N/A 5,002 5,316 5,754 6,081

In 2003, 74% of Suburban’s turnover and 63% of NMUI’s turnover came from sales to domestic customers. Service operations The Services Group primarily operates in Texas, New Mexico, California, Colorado, Alabama, Mississippi, Georgia and New Jersey. Its main subsidiary ECO Resources Inc. (ECO) is a wholly owned subsidiary that operates and manages water and wastewater treatment facilities owned by municipalities and other companies. ECO was acquired in 1985 and has 173 municipal utility contracts (MUDs) and 29 operations and management contracts. These contracts generated revenues of US$64.2 million in 2003. MUD contracts are for providing water and wastewater services in parts of Texas where no services exist, such as where towns have expanded. ECO serves approximately 600,000 people in Texas. The division’s order backlog at the end of 2003 was US$315 million compared with US$275 million in 2002, with 95% of contracts being renewed. In May 2000, ECO Resources was awarded a 5 year, US$10 million extension of its contract to operate and maintain a portion of the water and wastewater utility system of the city of Sugar Land, Texas. As part of the newly approved contract, ECO will expand its service from 7,500 to 12,225 customer connections and will operate and maintain the entire First Colony utility system, located within the city of Sugar Land. In August 2001, SWC acquired 90% of Atlanta-based Operations Technologies Inc. (OpTech), a provider of contract water, wastewater and public works services in the south eastern United States for US$8.2 million. OpTech was founded by Robert W. Monette in 1994 and operates utilities in Georgia and Mississippi. In June 2003, a US$30 million 10 year water and wastewater O&M contract was gained covering 30,000 households in Pascagoula, Missouri. ECO Resources, OP Tech and Aqua Resources, revenue breakdown (part of FY)


Source: Public Works Financing, March 2002, March 2003.



Water and wastewater outsourcing contracts

2000 2001 2002 MUD 173 178 263 O&M 29 66 196

In November 2002, SWC acquired the majority of AquaSource's water and wastewater contract operations business for US$10.3 million. These include AquaSource's contract operations in Colorado and the Houston area. The combined revenues from the two businesses contributed US$19.2 million and US$1.3 million in revenues during 2003. Southwest Water Co., profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Utility customers 74,842 88,031 89,963 91,965 94,057 Utilities Group 38.20 44.32 49.07 51.97 56.90 Services Group 42.65 60.43 66.48 78.83 116.00 Total turnover 80.85 104.74 115.55 130.08 172.97 Operating profits 9.31 11.04 11.73 10.77 14.79 Gains on land sales 1.65 0.13 0.00 0.12 0.73 Net income 5.82 5.38 5.45 5.98 7.17 Earnings per share (US$) 0.45 0.39 0.41 0.44 0.49 Dividends per shares (US$) 0.12 0.13 0.16 0.16 0.18

In January 2000, SWC formed Inland Pacific Water Company (IPWC) a JV designed to develop water-related and wastewater-related opportunities in Southern California's San Bernardino and Riverside counties. On February 25, 2000, SWS purchased West Covina's water distribution system and facilities, assuming ownership and operation of West Covina's water system on that date. The transaction added approximately 7,000 connections to SWS's customer bas e, an increase of approximately 11%. Covina generates US$5.5 million pa in revenues. Contract operations Master Tek International (MTI), a company providing water utility sub-metering services for household customers was acquired for US$4 million in April 2000. MTI serves some 127,000 customers in 30 states. SWC also has a 50% stake in Metro H2O, which anticipates providing wholesale water and wastewater services in the Austin area during the next 10 to 18 months. Three governmental entities have signed 40-year agreements with Metro H2O. Contact Details Name: Southwest Water Company Address: 225 North Barranca Avenue,

Suite 200, West Covina, CA 91791 USA

Tel: +1 626 915 1551 Fax: +1 626 915 1558 Web: www.southwestwater.com Anton C Garnier (Chairman and CEO) Peter J Moerbeek (President and COO) Richard J Shields (CFO) Maurice W Gallarda (VP New Business)



TYCO INTERNATIONAL LTD Tyco International Ltd. (TI) is a manufacturer and supplier of industrial products and systems. TI’s Earth Tech subsidiary is part of the company’s Engineered Products and is mainly involved in engineering and consulting work in the fields of water, waste management, environmental remediation and transportation. Earth Tech has been involved in the construction of a variety of water and wastewater treatment plants in the USA, Canada, Thailand and the UK. The company has a turnover of approximately US$1.3 billion pa. Tyco International Ltd, profit and loss account

Y/E 30/09 (US$ million) 1999 2000 2001 2002 2003 Turnover 22,497 28,932 30,037 35,644 36,801 Operating income NA NA 5,616 -1,452 3,067 Net income 874 4,319 3,464 -9,180 980 Earnings per Share (US$) 0.53 2.56 1.92 -4.62 0.49

Earth Tech operates more than 200 water and wastewater treatment facilities in the United States, Canada, United Kingdom, Ireland, Hungary, China, Australia, Thailand, Venezuela, and Brazil. Earth Tech's water and wastewater treatment facilities serve more than 10million people worldwide. In the USA, Earth Tech has a number of O&M/DBFO contracts with small and medium sized towns for water and wastewater facilities. In the UK, it has a JV with Morrison Plc and has been involved in a number of Scottish PFI sewage treatment projects. Morrison Plc has recently been acquired by Awg as a springboard for its international water service activities. According to PWFinancing (March 2001), Earth Tech serves approximately 1.5 – 2.0million people in the USA. Outsourcing revenues in the USA are as follows: Earth Tech, revenue breakdown


Source: Public Works Financing, 2001, 2002, 2003 (2002 data are PWF estimates) During 2001-02, Earth Tech acquired engineering and water management companies in Australia and Thailand to build up its presence in the region. Earth Tech, populations served

Country Water Sewerage Total USA 1,250,000 750,000 1,500,000 Australia 0 50,000 50,000 Brazil 180,000 300,000 300,000 China 4,150,000 4,150,000 4,150,000 Mexico 400,000 517,000 517,000 United Kingdom 0 63,000 63,000 Total - home markets 1,250,000 750,000 1,500,000 Total - international 4,730,000 4,963,000 4,963,000 Grand Total 6,097,000 5,880,000 6,580,500

USA 1997 Franklin 20 year DBFO Water A 5million gallons per day water treatment plant was constructed by Earth Tech in 1997 at a cost of US$15 million. The facility supplies water to the entire city. 2001 Newport 20 year DBO Wastewater The contract involves constructing a 10.7million gallon per day wastewater facility for Rhode Island city and will generate US$68.9 million in revenues. It is anticipated that the DBO will undercut original cost projections by 25% over its life. 2003 New London 5 + 5 year O&M 45,000, water & wastewater



The five year O&M contract for the city of New London, CT is worth US$4.4 million and carries a five year renewal option. It covers the city’s water system (14,000 customers) and wastewater systems (6,000 customers). Mexico In June 2001, Earth Tech acquired Atlatec S.A. de C.V. (Atlatec), the Environmental Division of Cydsa. S.A. de C.V. Atlatec, specialises in the provision of water and wastewater treatment services to the refinery industry and is moving into the water distribution market. Concessions include wastewater treatment facilities for Pemex refineries located in Cd. Madero, Tula, Cadereyta and Minatitlán. In addition, Atlatec has a concession for wastewater facilities in Chihuahua and is to build and operate the water distribution and treatment system for Nogales, Sonora. 2002 Orizaba 20 year DBFO 117,000 water & sewerage

In September 2002, the company gained a US$15.5 million DBO for a wastewater treatment plant in Orizaba by Fideicomiso del Sistema de Aguas Residuales del Alto Rio Blanco (FIRIOB), a local industrial grouping. The system will treat 80,000m ³ of wastewater daily with a biochemical oxygen demand of 109.9 tonnes per day. The facility will treat wastewater from Orizaba, as well as wastewater from a brewery, a paper mill and 12 other industries. Work is scheduled for completion in August 2004. 70% of the finance comes from FIRIOB and 30% from municipal sources.

2003 Xalapa 20 year DBFO 400,000 water & sewerage A US$55 million DBFO water and wastewater contract for the town of Xalapa was awarded to ET’s Aguas Tratadas de Xalapa, including increasing the connection rate to these services from 50% to 100%. Works will include a 65,000m 3 per day water treatment plant due to enter service in 2005. Base revenues from 2005 will be US$7.0 million pa. China 1999 Changli 30 year ‘concession’ 150,000 water & sewerage 2001 Guangzhou 20 year DBFO 1,000,000 sewage treatment 2002 Tianjin 20 year DBFO 3,000,000 water treatment The Changli concession covers engineering, project management, construction, and O&M of the county's water supply system. The JV Company, Qing Huang Dao Pacific Water Company, is responsible for billing customers in Changli. Earth Tech is developing a water supply, treatment, and distribution system that will produce up to 60,000m 3 per day of water to serve a projected population of 150,000, plus a tourist population of 75,000 during peak periods at a cost of US$10 million. In December 2001, Earth Tech started work on the Xi Lang wastewater treatm ent plant in Guangzhou. The US$120 million 20 year DBFO contract is a JV. The 2 phase project will treat 104million gallons of effluent per day. The first phase will treat 52million gallons of wastewater per day and serve most of the city's Fang Cun District, the largest and fastest-growing district in Guangzhou. It is scheduled for completion in 2 years, after which Earth Tech will manage and operate the system for 18 years. The second phase will provide for treatment of an additional 52million gallons per day of wastewater. A US$400 million, 20 year DBFO project for the Jie Yuan Water Treatment Plant in Tianjin was awarded by the Tianjin Water Works Group Co. in May 2002. The plant is capable of treating more than 400,000 m³ of water per day and will be comprehensively renovated and upgraded. Australia

2004 Cranbourne 25 year BOT Wastewater The A$ 38 million, 30,000 M3 per day facility is designed to provide recycled water for a number of horticultural and agricultural businesses in the Melbourne area.

2003 Echuca & Rochester 25 year BOT Wastewater The 25-year contract is to design, build, finance, own and operate a water reclamation project for Victoria’s Coliban Water. The project will generate revenues in excess of US$80 million, serving two agricultural communities in the state. It involved the development of an integrated advanced sewage treatment system for the two towns for water recovery for irrigation use on farmland. Construction of the 2 wastewater treatment plants will cost A$40 million and they will enter service in 2004.



Brazil 1999 Nova Friburgo 25 year concession 180,000 water and wastewater Nova Friburgo is near Rio de Janeiro. Earth Tech is responsible for constructing a new sewage treatment facility, expanding the existing water treatment plant, providing ongoing O&M services for plants and distribution and collection systems, installing water meters, and managing the utility billing program. US$70 million of investments will be made during the operating period 2000 Jau 25 year DBFO 120,000 wastewater Jau is in Sao Paulo state. The contract is worth US$80 million. Both contracts in Brazil were gained through Earth Tech’s Multiservice-engenharia Ltd subsidiary. Venezuela

2000 Jose DBFO Industrial water & wastewater Aguas Industriales de Jose (AIJ) is a JV between Earth Tech (75%) and PDVSA, Venezuela’s national petroleum company (25%). AIJ is providing water and wastewater services to 12 petrochemical consortiums at the Jose Industrial Complex. Earth Tech will initially invest US$75 million in the project. AIJ owns and operates a facility which treats and supplies industrial water at a rate of 112Ml/day. This facility has been upgraded to have a 260Ml/day capacity. Hungary

2003 MOL 15 year industrial outsourcing Wastewater services The contract with MOL, the Hungarian Oil & Gas Company involves expanding, upgrading and managing the wastewater treatment facilities at the Duna refinery in Szazhalombatta, near Budapest. Total construction costs will be US$35 million and Earth Tech will manage all of the wastewater assets and services at the refinery for 15 years. The project has been financed with the support of the EBRD. United Kingdom

2003 UK MoD 25 year PFI Water & wastewater services Bray Utilities, consisting of Kelda (45%), Earth Tech (Tyco International, 45%) and Kellogg Brown & Root (USA, 10%) gained Package A of Project Aquatrine, serving some 1,000 military sites in South West England, the Midlands and Wales. The contract is worth £1 billion and operations commenced in December 2003. 2001 Newry 30 year BOT 63,000 sewage treatment This contract is for a PFI sewage treatment plant in Northern Ireland. Republic of Ireland In June 2001, Jones Environmental, a company specialising in the design, construction and operation of water and wastewater facilities was acquired. Jones Environmental is involved in a number of projects in the Republic of Ireland and Earth Tech aims to develop its concessional activities as the market develops. Contact Details Name: Tyco International Address: The Zurich Centre, 2nd Floor, 90 Pitts Bay Road,

Pembroke HM 08. Bermuda Web: www.tycoint.com Edward D Breen (Chairman and CEO, Tyco) Contact Details Name: Earth Tech Address: 100 West Broadway, Suite 240, Long Beach

CA, 90802, USA Tel: +562 951 2000 Fax: +562 951 2100 Web: www.earthtech.com Diane C. Creel (President and CEO, Earth Tech) Jeff Kissel (CFO, Earth Tech) Kim Early (President, Global Water Managem ent)



WESTERN WATER Western Water (WW) seeks to identify undervalued water assets and, develop and sell them to customers in densely populated areas in the arid western USA. The company operates through the acquisition of water rights and other interests in water, the purchase of real estate for their water rights and the sale or lease of water at various locations in California and Cherry Creek, Colorado. Due to regulatory delays, since 2000, WW has rationalised its operations due to the increased cost of energy making the pumping of water less competitive, along with the company’s increasingly weak financial position. No water sales were made in the 2002 financial year and only one in the 2003 financial year (which generated a gain of US$964,000). As a result, only the Cherry Creek project is currently being actively developed. In June 2003, WW sold its shares in the Bear Valley Mutual Water Company (South California) to a local city water department, generating cash proceeds of approximately US$723,000 and a gain on the sale of US$79,000. In May and June 2004 WW sold Loma Rica Ranch (Yuba County, California) and Cardozo Ranch (San Bernardino County, California) for US$1.05 million, with an aggregate gain of approximately $85,000 for the Company. WW has the rights to extract 242 acre-feet pa of water in Los Angeles County. This water is sold to the City of Inglewood in a contract that will expire at the end of 2004. Western Water, profit and loss account

(Y/E 31/03, US$ million) 1999 2000 2001 2002 2003 Turnover 1.823 2.796 2.126 1.464 1.529 Operating income -5.167 -6.420 -3.325 -2.593 -2.592 Net interest -0.586 -0.625 -0.661 -0.690 -0.766 Net income -5.435 -4.078 5.395 -3.281 -2.146 Earnings per share (US$) -0.80 -0.59 0.66 -0.53 -0.32

While the company believes it has the resources to continue operating to the end of March 2005, it is uncertain about its future beyond this date. Reporting for the year ending March 2004 have been delayed because of the on-going problems facing the company. In 1998, Aguas de Barcelona (Agbar) acquired 10% of WW. Agbar originally intended to increase its stake to 20%, but declined to do so in the light of WW’s ongoing difficulties. Currently, Agbar holds 6.7% of WW’s equity, along with all of the Class F preferred stock. Contact Details Name: Western Water Company Address: 102 Washington Avenue,

Point Richmond, CA 94801

Tel: +(877) 928-9282 Fax: +(510) 307-7863 Web: www.wwtr.com Michael Patrick George (President, Chairman, CEO and acting CFO) James Sherman (VP, Secretary)



YORK WATER The York Water Company (YWC) has provided water services in York County, Pennsylvania, since 1816. The company’s water abstraction has a safe daily yield of 23million gallons, compared with an average daily consumption of 17.49million gallons in 2003. YWC’s service territory has been gradually expanded through the laying of new mains and contracts to sell water to adjoining boroughs. Three service extensions were completed in 2002 and two neighbouring townships (Conewago and Springfield) were connected during 2003. In 2003, 60% of turnover was obtained from residential customers (58% in 1999), 27% from commercial and industrial (31% in 1999) and 13% from other sources (12% in 1999). Industry within the Company's service territory is diversified, manufacturing such items as furniture, electrical machinery, food products, paper, ordnance, textile products, air conditioning equipment and weight training equipment. York Water, operational data

Customers and consumption 1999 2000 2001 2002 2003 Consumption (gallons/day) 20,928,000 19,541,520 19,734,260 17,901,000 17,498,000 Number of customers 48,144 49,195 50,079 51,023 51,916 Population served 144,000 146,000 149,000 153,000 156,000

The company has two impounding reservoirs. The lower reservoir covers 220 acres and holds about 1.15billion gallons of water. The upper reservoir covers 290 acres and holds about 1.6billion gallons of water. York Water has a filtration plant half a mile south of the city of York. The company’s filtration unit has a capacity of 31million gallons per day and is capable of filtering 46million gallons per day during periods of peak demand. YWC installed an additional pipeline to the Susquehanna River for US$23 million in 2004, when the current abstraction and distribution network is expected to reach capacity. York Water, profit and loss account

Y/E 31/12 (US$ million) 1999 2000 2001 2002 2003 Turnover 17.51 18.48 19.40 19.55 20.89 Operating profit 7.26 8.47 8.93 8.33 9.33 Interest paid 2.64 2.80 2.86 2.69 2.52 Other income 0.25 0.17 0.16 0.18 0.12 Net profit 3.15 3.76 4.01 3.79 4.45 Earnings per share (US$) 0.53 0.63 0.65 0.60 0.70 Dividends per share (US$) 0.47 0.49 0.51 0.53 0.55

Revenues increased by 5.0% in 2001, mainly due to a 4.2% rate increase that came into force in September 2001 and through an increase in customers. In 2002, population growth and the 2001 rate increase were in part offset due to drought restrictions. In June 2003, a request to increase rates by 13.7% was approved and will increase revenues by US$1.72 million pa. A further rate rise approved in August 2004 to fund the Susquehanna River project will raise revenues by US$3.50 million pa. Contact Details Name: York Water Company Address: 130 East Market Street,

York PA 17405-7089 USA

Tel: +1 717 845 3601 Fax: +1 717 843 3793 Web: www.yorkwater.com Jeffrey S. Osman (President and CEO)


APPENDIX 1:

THE WATER CYCLE AND WATER SERVICES

APPENDIX 1: THE WATER CYCLE & WATER SERVICES


APPENDIX 1: THE WATER CYCLE AND WATER SERVICES Distribution of water resources The world’s water resources are not a problem. It is their distribution and management in relation to current and future demand that presents challenges. The ‘Blue Planet’ is aptly named. Evenly distributed upon a perfectly smooth sphere, water would cover the earth to a depth of 2.7km. Freshwater alone would cover the surface to a depth of 70m. However, only 0.16% of the world’s water is contained in freshwater lakes and rivers. Global breakdown of all water resources (km3)

Salt water 1,348,000,000 97.390% Freshwater 36,020,000 2.610% - Frozen 27,820,000 2.010% - Groundwater 8,062,000 0.583% - Lakes and rivers 225,000 0.016% - Atmosphere 13,000 0.001%

Freshwater Saline or brackish water has at best little utility for life on the land surface. Life upon the land depends on a minimum access to freshwater in a useable form. As the table below highlights, barely 10% of freshwater supplies are even potentially readily available for abstraction. The fragment held in the atmosphere constantly replenishes the river system, in itself a fraction of surface water supplies. Global breakdown of freshwater resources

Frozen 77.230% Groundwater (800-4,000 metres) 12.350% Groundwater (>800 metres) 9.860% Freshwater lakes 0.350% Soil 0.170% Atmosphere 0.040% Rivers 0.003% Plants & animals 0.003% Water bearing minerals 0.001%

The water cycle The water cycle refers to the process whereby water is circulated through the biosphere. The cycle begins with water being precipitated on to the land surface. On reaching the ground, it either infiltrates the soil or runs off into the river system. Water in the soil is either taken up by plants where it is returned to the atmosphere through transpiration, or it percolates through the soil. Once through the soil, it either enters the river system or recharges aquifers (water bearing rock). From the aquifer, water seeps into the river system, is discharged into the sea through coastal springs or is stored in the rock. Some water from both river and ground water is taken up by plants and in turn transpired, but most is discharged into the sea. Evaporation from seawater, along with a small amount from surface waters, is the main source of atmospheric water. The global water balance Even though more water is precipitated upon the oceans than the land surface in relation to their total surface area, the actual process involves more water being taken up from the sea than is returned by precipitation. In total, 500,000km 3 pa of water is taken up and returned through evapotranspiration and precipitation. While 430,000km 3 pa is removed through evaporation from oceans and 70,000km 3 pa in evapotranspiration from land, 110,000km 3 pa is returned to the land through precipitation against 390,000km 3 pa precipitation into the sea. This results in a net gain of 40,000km 3 pa on to land. It is this net gain that sustains life upon the earth’s surface. Residence times The longer water is held in a particular place, the less enjoins in the water cycle. While water in the atmosphere and rivers may account for a small fraction of the global total at any one time, its relative mobility means that on average 33 times more water is precipitated each year than is held in the atmosphere at any one time. Average residence time for water

Oceans 2,500 years Groundwater 1,400 years Lakes 17 years Rivers 16 days Atmosphere 8 days



Water usage The intensity of water withdrawal depends to a large extent upon how much water is used for power station cooling and for irrigation. Groundwater resources are used mainly for domestic and industrial use, especially in urban areas. These resources are not degraded by domestic and industrial effluents in the direct way that surface waters are. Instead, aquifers may originate well away from areas of effluent discharge and thus their integrity remains relatively unimpaired for quite some time after urban watercourses become unsuitable for use.

Surface water Groundwater 42,650km 3 pa renewable resources <10,952km 3 annual recharge 3,414km 3 pa withdrawn 760km 3 pa withdrawn 9% domestic 24% domestic 20% industry 72% industry 71% agriculture 5% agriculture

Desalination plays a localised role in water production. Generation rose from 3.0km 3 in 1990, rising to 5.3km 3 by 2001. This is equivalent to 1.3% of global water withdrawal. Supply and demand – a growing imbalance If freshwater supplies and humanity were evenly distributed across the land, water resources would not be an issue. However, sources of water supply tend to be mismatched with regard to areas of need. Population growth and urbanisation are placing further pressure on water resources and their management. The number of people living in water stressed countries is projected to climb from 470million to nearly 3billion by 2025. Water stress is defined as countries where there is 1,000–1,700m 3 of freshwater per capita per annum, while water scarcity is where there is less than 1,000m 3 of freshwater per capita per annum. Meanwhile, the population of urban areas in developing economies has been forecast to grow by 160% between 1990 and 2030.

% of population living in: 1975 2000 2015 All urban areas 37.9 47.2 53.7 10million or more 1.7 3.7 4.7 5million to 10million 3.0 2.8 3.7 1million to 5million 8.2 11.1 13.3 500,000 to 1million 4.3 4.8 4.9 Fewer than 500,000 20.8 24.8 27.1

% population increase Developed Undeveloped 1975-200 2000-2015 1975-200 2000-2015 10million or more 2.4% 0.3% 9.5% 11.1% 5million to 10million -1.7% 0.6% 5.3% 8.8% 1million to 5million 5.4% 2.6% 20.6% 25.7% 500,000 to 1million 0.7% -0.3% 7.9% 6.7% Fewer than 500,000 5.7% 2.4% 44.2% 42.0%

There are 14 discrete areas where more than 10million people live in close proximity and water shortages and sanitation problems are one of the central constraints to their development. Over the next 25 years, at least 12 more such areas will exist, none of which currently have adequate water or sewerage infrastructures. At the same time, water use is set to rise by 40% by 2020, with 40% more water being needed for food and 20-70% more for industrial and municipal demand. People living in areas of water stress and scarcity (million people)

1995 2025 Million people Countries People affected Countries People affected Water stress 24 460.0 48 2,849.5 Water scarcity 18 166.5 29 803.7

A slum future? In 2001, 926million people, or 31.6% of the world’s urban population lived in slum areas. 43% of the urban population of less developed economies live in slum areas, compared with 6% in developed economies. The UN (‘The Challenge of Slums’ 2003) anticipates this figure rising to 2.0billion by 2033 and 3.5billion by 2050.



Percentage of urban population living in slums, 2001

Sub-Saharan Africa 71.9% South-central Asia 58.0% East Asia 36.4% Western Asia 33.1% Latin America & Caribbean 31.9% North Africa for 28.2% Southeast Asia 28.0% Oceania 24.1%

Access to safe water and sanitation According to the United Nations Environment Programme (UNEP), the number of people without access to safe drinking water will rise from 1.4billion in 1999 to 2.3billion by 2025 in the absence of accelerated capital spending programmes. Approximately 2.6 billion people currently do not have adequate access to suitable sanitation. In consequence, some 60,000 people die every day due to waterborne diseases. Percentage without access to improved water supply and sanitation within regions, 2000: Water Sanitation Urban Rural Total Urban Rural Total Sub-Saharan Africa 17 56 43 27 57 47 Middle East/North Africa 5 23 13 7 30 17 South Asia 6 20 15 33 78 66 East Asia/Pacific 7 33 24 27 65 52 Latin America & Caribbean 6 34 14 14 48 23 CEE/CIS & Baltic States 5 18 9 3 19 9 Industrialized Countries 0 0 0 0 0 0 Developing Countries 8 31 22 23 65 48 Least Developed Countries 18 45 38 29 65 56 World 5 29 18 15 60 39 Connection rates in major cities:

Household tap Sewer Europe 96% 92% North America 100% 96% Latin America & Caribbean 77% 35% Africa 43% 18% Asia 77% 45% Oceania 73% 15%

In excess of 95% of people living in high income countries had satisfactory access to potable water and appropriate sanitation services by 1990, along with 74% access to potable water and 68% access to appropriate sanitation services by 1990 in medium income countries. Concerns in the more developed economies are increasingly being driven by environmental and aesthetic considerations, while those in the less developed economies remain rooted to those of basic public health. The cost of ‘free’ water Safe supplies of water are not free, but neither are the consequences of inadequate provision. The economic cost of poor water supplies and sewerage are in i llness (500million affected each year), debilitation (15million rendered 'economically inactive' each year) and death (2-5million dying each year) from water borne diseases and environmental impairment. Yet such supplies are not cheap. In slums around many cities, the cost of (vended) water accounts for a large part of household expenses; 18% in Onitsha, Nigeria and 20% in Port-au-Prince, Haiti, for example. Pressure points in the water cycle Of the 42,650km 3 annual net gain through precipitation on to land, 24,000km 3 is lost as surface run-off in floods, leaving a net 16,000km 3 of useable water input. Approximately 9,000km 3 pa is readily accessible, with an annual abstraction of 3,414km 3 highlighting the scope for local imbalances between water availabi lity and its need. It is evident that the element of the water cycle used by the human economy is not optimally managed. Much of the water abstracted is not put into productive use.



Optimising the water cycle The water cycle needs to be managed in urban areas due to the need for reliable supplies of water of a given quality in a limited area along with the treatment of wastewaters generated by human agency. The management of the water cycle can be broken into four distinct sections: [1] water abstraction and transfer; [2] water treatment and distribution; [3] sewerage; and [4] sewage treatment, disposal and recovery. Supplies need to be managed so as to maintain the integrity of the water cycle through optimising the productive use of water, preventing over-abstraction from surface water resources, enabling the recharge of groundwater and preventing the pollution of surface and groundwater resources. The flow chart below demonstrates how water technology can be used to mobilise water resources already abstracted into productive use. Distribution losses for municipal provision can realistically be reduced to 20%, releasing 74km 3 pa for productive use. Assuming that industrial leakage can be reduced to 10%, this releases 120km 3 pa for productive use. Improving irrigation efficiency to 50% releases 244km 3 pa for productive use, along with a further 325km 3 pa of treated municipal water (50% treatment) and industrial water (25% treatment).

Pressure points in the water cycle and their amelioration

Total water withdrawal 4,179km 3 pa

Domestic use 494km 3 pa

Industrial use 1,210 Km 3 pa

Agricultural use 2,462km 3 pa

Productive use 320km 3 pa

Productive use 970km 3 pa

Productive use 1,112km 3 pa

Recovery 125km 3 pa

Distribution loss 174km 3 pa

Distribution loss 240km 3 pa

Distribution loss 1,475km 3 pa

Leakage Management - Optimise Productive use

10-60% lost 25-80% lost

Regional and national water scarcity

Sewage treatment & effluent recovery for agricultural & non-potable applications

Treated effluent for groundwater recharge

Untreated effluent not recovered

Drip irrigation and high efficiency applications

Sale of water rights – transfer from agriculture to domestic & industrial use

Economic pricing for waste avoidance

20% lost

Treating effluent to protect water resources

Agricultural water undervalued and misused

AP

PE

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HE

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R C

YC

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455 Masons W

ater Yearbook 2004 – 2005


APPENDIX 2:

PRIVATE SECTOR PARTICIPATION

APPENDIX 2: PRIVATE SECTOR PARTICIPATION


APPENDIX 2: PRIVATE SECTOR PARTICIPATION Types of privatisation One of the difficulties currently facing the water sector’s internationalisation is the lack of a common understanding as to the forms of private sector participation. One person’s lease contract can, in extremis , be another’s concession, and so on. An internationally agreed set of concession contract definitions is currently being developed by a number of concerned companies and multilateral organisations. Preludes – privatisation through evolution and revolution Consulting and strategy development and implementation contracts are not regarded as full private sector participation contracts as they are not involved in the management of the actual assets. These contracts are increasingly being used as ways of developing the relationship between a municipality and the private sector company so as to decide on the framework for bringing in private sector management. Privatisation contracts can be gained outright through a bidding process, or they can evolve from contacts established through consulting, construction or engineering activities . A world of opportunities beckons. Markets can broadly be classified as being primary markets (first privatisations in a country), secondary markets (initial privatisation contracts already awarded, but to less than 10% of population), tertiary markets (major private sector contracts in place, covering 10-50% of the population) and mature markets (significant private sector participation, covering over 50% of people). These market types also reflect the ideas of David Hosein and Paul Rathbone of Andersen, who look at markets in terms of emotion, economic and ideology. Each market offers a risk - opportunity payoff. Primary markets clearly offer more in terms of opportunities, especially for a new entrant with no established presence in the country. Against this, the privatisation process may be volatile, since there will be limited practical guidance as to how to gauge political, regulatory, economic or operational risk. In mature markets, risk management can be finely tuned, but this information will probably be shared with a broad range of potential competitors, so that the bidding process will be appreciably more competitive. In such a market, an established player will seek to benefit from economies of scale via its extant operations, but may prove vulnerable if there is a desire for change for change's sake. Primary markets (first wave) Primary markets are those yet to experience their first wave of private sector contract awards. These markets may also be split into those where private sector participation is actively under consideration, such as in the Netherlands, South Korea, Nepal and Egypt and those countries such as Switzerland, Iran and Japan that for various reasons have ruled out any material changes for at least the short to medium term. Despite the progress made by the private sector to date, a clear majority of countries remain as primary markets. Privatisation may be initiated through four broad approaches. Initial public offering of a corporatised utility. This approach was adopted in Brazil through the partial flotation of SABESP (Sao Paulo). The state government still holds 72% of SABESP's equity and has adopted a gradualist strategy towards selling more shares in the company. A more extreme example was in the Czech Republic in 1993, where shares in a number of regional utilities were offered to municipal, institutional and international investors. Private sector concession award for one or more small contracts. A foot in the door approach that concentrates on gaining experience of private sector participation through local contract awards. This approach has been used in a number of European countries without a history of private sector participation such as Norway and Portugal. Lease, management and O&M contracts. A gradualist approach, whereby municipalities and the private sector get to know each other through the increasing delegation of responsibility to the private sector. This approach can be seen at various stages of evolution in Mexico, Mozambique and Kazakhstan. It can be argued that these in turn stem from contacts made with private sector construction and engineering companies over a long period of time as in Egypt and South Africa. Major city concession awards. This is the most abrupt approach, designed to channel private sector investment and management towards infrastructure that has been unable to meet the demands of urban expansion. This approach is popular in developing economies (for example, Casablanca in Morocco and Buenos Aires in Argentina), with city contracts being on occasion divided into zones (Jakarta in Indonesia) or into water and sewerage services (Budapest in Hungary). These contracts typically concentrate on capital cities because they are seen as having a lower risk profile than other areas and can thus attract private sector funding more easily. Such is the impact of these contract awards that they often result in countries by-passing the second stage of the market penetration criteria as outlined below. Outside city-states such as Macao, national contract awards remain distinctly the exception. Indeed, the only example to date has been for urban sewerage services for Malaysia. Regional contract awards tend to concentrate on rural regions and their provincial towns as in the Czech Republic. The only example of a regional



privatisation including major cities to date was the water and sewerage services privatisation in England and Wales. Secondary markets (second wave) While cases such as the Czech Republic or Malaysia experienced a far-reaching initial wave of privatisation awards, the initial impact of privatisation is typically of a more piecemeal nature. Secondary markets are defined as countries where less than five contract awards have been made to date and less than 10% of the population receive either water or sewerage services via the private sector. Normally one or two water companies would provide these services. Tertiary markets (third wave) Tertiary markets are defined as countries that have between 10% and 50% of their population served by the private sector, usually via six or more separate contracts provided by at least two companies. Such a market share can be attained via a single major city concession award as in the case of major city contracts, via a single award. Examples of the former include Spain and the USA, while examples of the latter include Argentina, Mozambique and Bulgaria. Mature markets This covers countries where more than 50% of the population is served by the private sector. Opportunities exist as new markets are developed in response to environmental compliance (for example, sewerage services in France) or through a specific regulatory exercise (for example, inset appointments and MOD privatisation in England and Wales). Otherwise, apart from acquiring extant companies, most opportunities are to be found in rural areas and small towns, placing the emphasis on developing economies of scale and integrating a large number of small contracts into a coherent management structure. To date, the only examples are to be found in France, the Czech Republic, Chile and England and Wales. Differing levels of private sector involvement Commercialisation Commercialisation calls for the municipal water and/or sewerage entity to be operated as a free standing concern that does not involve cross subsidies with other municipal services and runs on a self-financing basis. A commercialisation strategy has been adopted in a wide number of countries either as an end into itself or as a prelude to more extensive private sector participation. Madrid’s Canal Isabel II has operated as a commercialised entity since 1853, without any firm plans for privatisation to date. In Australia, Sydney Water has been commercialised, with bulk water provision services being handed over to the private sector. Prior to the current privatisation programme, Chile has used commercialisation allied with short-term service contracts, delegating responsibility to the private sector for a narrow range of services such as meter installation. Santiago’s EMOS is the most notable example, having been commercialised in 1989 and sold in 1999. Other examples include a number of German cities (e.g. Hamburg), South Africa’s Umgeni Water and Thailand’s municipal and provincial water authorities. A hybrid privatisation has emerged from a number of these commercial entities where the municipality floats some of the shares of the entity while retaining majority ownership and therefore management control. The best example is in Brazil, where Rio’s SABESP is actively traded on the national Bourse, while the municipality for the time being retains 72% of the company’s equity. 49% of Belgium’s Aquafin has been sold to a number of corporate and institutional investors, with overall control being retained by MVW, the region’s sewerage management agency. O&M and lease contracts The next step up involves awarding O&M or lease contracts. Operations & maintenance (O&M) contracts usually operate on a fixed fee basis. Lease contracts typically involve asset operation and tariffs, but not capital expenditure. These two types of contract do not delegate full financial responsibility to the private operator, especially with regards to private capital investments. Concessions Concessions involve the private sector operation of assets in order to pay for new facilities and upgrading work. Build-own-operate (BOO) and build-operate-transfer (BOT) contracts sell specific services to the municipality in relation to a specific programme of capital improvements, while the full utility concession contract embraces all aspects of service provision and capital spending. These contracts require a much more specific regulatory environment so as to account for the elements of risk involved. Other varieties sometimes seen are BOTT (build, operate, train and transfer) and DFBOT (design, finance, build, operate and transfer) contracts. A BOO/BOT project’s cash flow is usually contractually pre-determined, often with government backing. There is an element of construction risk, but the absence of market risk means that the project can have more debt loaded in than in a full utility privatisation. A project’s construction risk can be mitigated whereby a facility already



generating cash flow gets taken over for expansion by the private sector. Therefore BOT/BOO projects are an effective means of rapidly organising private capital and management towards a narrow range of services. However, some of the simpler project-oriented contracts do not affect the utility’s management and operation, thus underlying problems such as leakage (and illegal interception), over-staffing and poor tariff collection may not be addressed. In these cases, the underlying utility remains uncreditworthy, and it can be argued that a BOO/BOT contract may therefore in fact delay system -wide improvements. In full utility concessions, existing revenues can be used immediately to service debt, thereby mitigating construction risk. Over a period of time, a utility can benefit from a steady flow of revenues from a diversified customer base and, if it integrates horizontally, from a diversified asset base. A more robust balance sheet can be created, allowing for internal finance as well as the use of capital markets to sell long term debt. Asset sale The most dramatic and politically contentious form of privatisation is the outright sale of the utility’s assets. To date this has been used in the 1989 sale of the English and Welsh water and sewage companies (WASCs), in two examples in the Czech Republic, in one in Belize and in t Chile. While the assets are in private hands, the licence to operate them can be subject to renewal. In the case of the UK WASCs, a 30 year operating licence was awarded to each entity in 1989. It is evident that the assets carry no value unless one can operate them, while the cost of building a duplicate network would be prohibitive. The problem with losing stakeholder participation in utility services is that it can erode the customers’ sense of civic duty. During the 1976 drought, water consumption in England and Wales fell and standpipes and supplies brought in by tankers were accepted stoically. "Share a bath with a friend" suggested Dennis Howell, the then Minister for Drought. In contrast, during the 1995 drought, consumption rose amidst intense bitterness even at the possibility of water restrictions being imposed. They were not, but it was evident that an unexpectedly large element of the public’s goodwill was unintentionally divested in 1989. In contrast, Aguas de Barcelona (Agbar) experienced a significant drop in consumption during the 1994-96 drought in Spain. Agbar is a private sector operator of municipally owned assets on a concession basis. Privatisations – Contract size and extent of privatisation compared

O&M BOT Full Concession Asset Sale Local / USA France UK PFI & inset USA Single site appointments Town / USA Germany Germany Czech Republic Small city Kazakhstan Czech Towns USA City Mexico Atlanta Manila Chile City Budapest Jakarta UK WOCs River Basin Greater Czech Argentina UK WASCs / Region Amman Regions Italy Chile Country Chad (Phase 1) Ghana (urban) Chad (Phase 2) N/A

Characteristics of the main types of water and wastewater privatisation contracts Because of the elastic nature of definitions at present, the five forms of privatisation outlined below ought to be regarded as indicative. It is quite likely that a contract could offer elements from the differing categories. This can be a material concern in markets such as China, where the authorities are seeking foreign investment and management while seeking to impose the most restrictive terms that they can get accepted. Operations & management contract (O&M)

Time horizon 2-5 years, up to 10 Ownership Public Customer Government / Municipality Investment Public Cash flow profile Fixed fee for service Operation Public Construction risk None Tariff collection Public / Private Regulatory risk None

O&M contracts allow the private and public sectors to get to know each other in a relatively low risk environment. They do not address problems of municipal inefficiency. The short term nature of the contract means that political stability can be poor and there is limited scope for the private sector to improve the performance of the uti lity. Examples include: metering, leakage reduction and systems management for Mexico City (Mexico, four contracts held by Suez, VE and United Utilities) and water management for Antalya (Turkey, Suez).



Lease contract

Time horizon 10-15 years, up to 25 Ownership Public Customer Retail Customer Investment Public Cash flow profile Subject to market risk Operation Private Construction risk None Tariff collection Private Regulatory risk Medium

The municipality controls the assets, while the private sector controls their operation. Risk elements start emerging, with the private sector now dealing directly with the customers, and thus this can be the focus of discontent. Examples include: water and sewerage management in urban areas of Guinea (SEEG, SAUR/Veolia) and water services for Dakar and other major urban areas of Senegal (DSE, SAUR). BOOT/BOT/BOO concession

Time horizon 10-30 years, up to 95 Ownership Public Customer Govt /Municipal Investment Private Cash flow profile Pay on completion Operation Private Construction risk High Tariff collection Public Regulatory risk Low

Asset ownership under the three concession types

BOO Build Own Operate Concessionaire retains ownership of assets permanently BOT Build/Operate/Transfer Hands over assets at end of concession, never having owned them BOOT Build Own Operate Transfer Hands over ownership of assets at end of concession

Concession contracts call for a full understanding of the financial risks involved with the project. These concession contracts can be regarded as the classic water privatisation model. Examples include: water treatment BOO for Riverland (Australia, United Utilities/Bechtel) and a sewage treatment works BOOT for Puerto Vallarta (Mexico, Biwater). The UK’s Private Finance Initiative sewage treatment contracts are being awarded on a BOT basis. In many cases, the concession award takes place with the splitting of the water and sewerage entity into a service provision entity and an asset owning entity. The concession winner gains control of at least a significant proportion of the service provision entity’s equity, along with management control. The municipality in turn retains at least a controlling stake in the asset owning entity. The latter entity is subsequently responsible for the extant assets and new assets are vested into this entity at an agreed date. Full utility concession

Time horizon 20-30 years Ownership Public Customer Retail Customer Investment Private Cash flow profile Subject to market risk Operation Private Construction risk Low Tariff collection Private Regulatory risk High if politics volatile

In this case, the private sector is allowed to get on with upgrading and operating the services, while developing new assets for handing over to the municipalities in the longer term. There have been mixed results to date, but some outstanding successes such as Buenos Aires. Examples include: water and sewerage operations for Buenos Aires (Argentina, Aguas Argentinas) and water provision for Malacca (Malaysia, VE). Asset sale

Time horizon In perpetuity Ownership Private Customer Retail Customer Investment Private Cash flow profile Subject to market risk Operation Private Construction risk Very low Tariff collection Private Regulatory risk Very high

Problems of public perception and changes in regulatory priorities have meant that with the exception of Chile and one contract in Belize and two companies in the Czech Republic, the ‘British model’ (as asset sales have been dubbed), has not been copied abroad. In the USA, companies developed the assets in the first place. The ‘British’, ‘French’ and ‘German’ models The World Bank calls delegated water management through concession awards the ‘French model.’ The ‘French model’ is typically used to contrast it with the ‘British Model’ of asset sales. In fact, the real ‘French Model’ is the Affermage lease as traditionally used in private sector contracts in France. To make matters more complex, there is a recent tendency to refer to the ‘German Model’ as well. This approach is where the operating assets are



corporatised and a minority of the shares in the asset-holding company are held by one or more private sector companies, who in turn operate the concession. This is known as the ‘Kooperationmodel’ or the ‘German Model’. A further variant of the ‘German Model’ is the ‘Beteribermodell’, where the private sector operator pays a fixed rate for the right to operate the water or sewerage services. The ‘Kooperationmodel’ probably best describes the majority of concession contracts. The models compared:

Name Description Examples British Model Asset sale UK Water Plcs French Model 1 Affermage lease Suez/VE/SAUR (home) French Model 2 Concession Suez/VE/SAUR (international) German Model 1 Kooperationmodel Berliner Wasser (VE/RWE) German Model 2 Beteribermodell Gelsenwasser

Generally speaking, the confusion caused by these names and the contracts that they refer to highlights the need for globally agreed definitions of contract types. They ought not to play a significant role outside discussions about privatisation approaches and philosophies. The popularity of each approach The table below is based upon water and sewerage privatisation awards identified by the World Bank in developing economies during the first eight years of the 1990s. Private participation in water and sewerage in developing countries, by contract type, 1990–97:

(US$ million) Projects Total investment Concessions 50% 80% Divestiture 6% 4% Greenfield 31% 16% Operations and management 13% 0%

It is understood that the O&M entry in the above table includes lease contracts. While there are many of these contracts, the lack of private sector investment involved highlights their role as a partial privatisation that does not mobilise new sources of private sector investment. The experience to date, especially in developing economies, suggests that O&M and lease contracts are becoming a stepping stone towards concession awards at a later date or will continue to be used to address specific areas of concern, especially when linked with aid finance and loans from multilateral institutions. Greenfield operations are typically of a site specific nature, involving the construction of a water or sewage treatment facility, as seen in the UK’s PFI. In recent years, a number of greenfield contracts have been awarded in areas earmarked to become new housing or industrial zones. This approach has had some popularity in the Philippines. Divestitures have been seen to date in Chile. Given the confusion between contract types, it is not perhaps worthwhile to classify the concession contract types more specifically. Nevertheless, the concession approach, allied with the splitting of water and sewerage entities into operating and asset holding companies is becoming the favoured approach towards water privatisation in many countries. Water and power contracts compared Water is too often seen as power’s poor relative. It lacks the glamour of the major power contracts in terms of immediacy of delivery and the prospect of expensive new plant. Even so, its lower profile offers the prospect of more attractive returns. Power and water privatisation pros and cons compared:

Service sector Water / Wastewater Power Political risk Politics

Political risk ‘God’s gift’ ought to be free Essential for life & health

At the national level Essential for modern comforts A new resource needs to be paid for

Rate of return High (15-25%) A few global and local players Lower degree of competition

Medium (10-15%) Many global and regional players Highly competitive market

Size of project (for first 5 years)

Small to medium US$50–400million capex

Medium to large US$250–1,100million capex

Technology import Low part of overall cost Mainly local construction

The main cost component Imported or via joint ventures

It is interesting to note that some of the arguments against water, when compared with power, appeal to the sense of the irrational. These arguments are being eroded by the expediencies noted in the sections above. One of the more common arguments against private sector involvement in water and sewerage services against power (and telecommunications) is that the former are more ‘essential’ or ‘basic’ than the latter, especially for poorer



people. The manifest shortcomings of the status quo tend to be overlooked in such debates, along with the fact that water and sewerage programmes can largely be put into place with the judicious use of local manufacturing and technological capabilities. This is not to denigrate energy provision projects, but to highlight the importance of adequate water and sewerage services in economic development. The bad news (except for project arrangers) is that the amount of legal and preparatory work for a water/sewerage and a power project is broadly similar. It is tempting, given the disparity in size between these projects to stint on such work. It is to be hoped that the examples included in this publication will demonstrate the paramount importance of due diligence in both bid preparation and contract negotiation, while treating each contract on its own. The politics of PSP and service extension One of the most common political arguments against privatising water and sewerage services is that it will mean that water will be too costly for poorer people. In fact, pragmatic pricing policies based upon charging more per unit of water for households who use water for non-essential purposes has made private water provision both affordable and viable. Cross-subsidies and social provisioning lie at the core of service extension. Appropriate and safe water and sanitation services can be provided for 2-5% of household income. Questions about affordability and private sector involvement in developing economies tend to ignore the fact that under the current arrangements, it is the poorer people living in urban areas who have to pay over the odds to water vendors for supplies of distinctly dubious quality. People are willing to pay an economic price for water services if it comes with guarantees of quality and availability. Comparing the cost of water supplied from household connections and informal vendors

$ per m3 Household tap Public tap Water vendor Bandung, Indonesia 0.38 0.26 3.60 Dhaka, Bangladesh - 0.08 0.84 Kathmandu, Nepal 0.18 0.24 2.61 Bombay (Mumbai), India 0.07 0.07 0.50

Source: Mcintosh, A & Yniguez, C. (1997) It is the absence of piped water that costs more both in financial and public health terms. Popular support exists for adequate supplies of water and improved public health at an affordable rate. Opposition is most visible amongst the better off households who oppose paying an economic price for piped water supplies for gardens, swimming pools and other non-essential household uses. Indeed, with the lack of metering or progressive tariff structures, they are subsidised by poorer households. The fact that these are also the people with the most political influence means that the political picture is often distorted. The practicalities of delivering service extension What can the private sector offer to the unserved urban poor? For multilateral institutions, governments, municipalities and the private sector, when seeking to use PSP in service extension, three questions need to be answered: • Can these projects be delivered more cheaply? • Can new sources of finance be mobilised? • Can extant assets be operated more efficiently? These questions apply to all water and sewerage PSP projects, but are particularly pertinent here. UU’s water and sewerage contract in Manila (Philippines) involved a price cut of 65% in 1997 and is performing satisfactorily in terms of finances and service delivery (see company entry). Finance has become problematic, with the project finance market currently running at perhaps 25% of its peak capacity seen in the late 1990s. The private sector has two real strengths, mobilising extant assets to optimise their efficiency and developing new assets so that they provide a given level of performance at the lowest price. The challenges in arranging finance stems from poor risk management and concerns about foreign currency exposure. A mix of foreign and international debt can help to ameliorate this, as is being used in Malaysia and China. Otherwise, it remains essential for multilateral institutions, development banks, politicians and international aid agencies to create the right conditions to encourage these capital flows. One of the most important issues here is deciding if a concession is to be supported by outright grants designed to lower the cost of service extension. At the same time, cost recovery in the medium to longer term is essential. The key here has to be getting the cost of service provision down to affordable levels by using an appropriate and upgradable infrastructure. Privatising water and sewerage services can reduce capital spending by 20-45% and through economies of scale and efficiency measures, service provision costs by 10-25%. Capital spending costs are reduced by shifting construction work away from technology for its own sake to a performance-related basis, along with ordering through the contract holder’s parent company. Cost reductions are driven by competitive tendering whereby the



competing bidders are motivated to find the most cost effective ways of delivering a set of service criteria for a satisfactory rate of return. This approach creates incentives for the bidders to identify areas where they can drive operating costs down while at the same time improving service quality. Often the two will be linked. People are more willing to pay when they receive a reliable service, with demonstrable improvements in water quality. Reducing distribution losses allows more water to be provided to the customer without needing to mobilise new resources. Progressive tariff policies, allied with effective billing and the removal of illegal connections, drive down the overall cost of water provision for the less well off. The private sector’s role Suez currently serves 46million people in developing economies and 8.5million people classified as among the urban poor. VE, UU, Bouygues and RWE, among others, also provide services to the urban poor where there were none prior to privatisation. Suez’s 2002 publication ‘Bridging the Water Divide’ provides a number of case studies. The emphasis lies in developing a new infrastructure that meets current needs (piped water and sewerage) that can be upgraded as and when higher standards of service delivery are needed. By mobilising local labour at street level, the costs of developing these services can be greatly reduced. Finally, PSP has much to offer in making sure that the greatest benefits can be delivered for a minimal cost. In per capita terms, improving urban water, sewerage services and wastewater treatment ought not to exceed US$100-140 per capita, while providing these services from scratch should not cost more than US$300-450 per capita, less US$120-160 without full wastewater treatment. Suez has been able to provide basic water and sewerage services in Latin America for US$100 per capita. Rural service provision is appreciably cheaper, concentrating on the ready availability of water a short distance from each house, along with sanitation and effluent recovery and composting systems. Dealing with corruption There have been several highly publicised cases of corporate malpractice relating to the World Bank supported Lesotho Highlands Dam project. While no companies directly involved in the water and wastewater sector have been included in the World Bank’s listing of proscribed entities, the perception of corporate corruption in the procurement of private sector participation in the sector has been relentlessly exploited by the various anti privatisation bodies. At the same time, the private sector’s response to these allegations has been reactive in nature. A number of wide ranging statements, commitments and charters have been launched, but these have tended to avoid directly addressing the complaints raised by the various anti privatisation lobbies. As is the case with most research on the performance of Public Sector Participation (‘PSP’), investigations into corruption have chiefly been carried out by academics attached to anti-privatisation lobbies and a range of NGOs, principally in North America. This gives the anti-privatisation lobbies a great advantage when communicating ideas to the media. In consequence, anti-PSP polemics are effectively unchallenged. In terms of perception, it is fair to say that the international media, politicians and NGO lobbies see the private sector in general and privatisation in particular as causing corrupt practices to take place in the provision of water and sewerage services. In reality, corruption tends to be endemic under public ownership and operation. This is because water and wastewater per se are exposed to corrupt practises at a number of operational levels due to the nature of the services they operate. Such practices get minimal exposure at anything beyond the local level, as it is accepted modus operandi for providing these services. The Camdessus Report’s Recommendations ‘Corruption’ is mentioned 11 times and ‘corrupt’ a further two times in the Camdessus Report on "Financing Water for All" (CR). CR notes that corruption can arise among public and private, local and international participants in the water sector. The impact of independent NGOs such as Transparency International has been limited by the reluctance of governments, multilateral institutions and companies to adopt their recommendations on a consistent basis. CR’s specific recommendations with regards to water and corruption can be summarised as:

• Capacity building is to be encouraged • Water policies need to be defined and implemented • Leadership ought to be of a high calibre • The multiplicity of opportunities ought to encourage healthy competition • NGOs and stakeholders should be encouraged to expose corrupt practices • Companies are urged to co-operate to develop methods for promoting ethical behaviour • The public sector needs to develop standards that place their behaviour above reproach • Private participation transactions should be made more transparent • Develop best practice and model clauses in the legal agreements for private participation

Its recommendations are well meaning and hard to dispute. Indeed, they are of such a broad and generous nature that at first it appears churlish to query them. They do, however, need to be implemented and to take effect by the CR’s proposed 2006 reporting deadline. The private sector needs to acknowledge its structural failings in communicating that there are challenges to PSP playing a leading role in developed economies while being a material part of the process of providing universal



access to water and sanitation services in urban areas. There is an urgent need for the private sector to sponsor independent research so that a process of engagement can begin. Define corruption The cost of corruption can only be understood when stakeholders know where is happens and how it affects people’s lives. So, before concerns about corruption can be addressed, we need a commonly accepted set of definitions as to what corruption is and is not. There is also a need to differentiate between what might be called ‘actual’ or fiscal corruption and ‘moral’ corruption, where bidders abuse the tender process by submitting a loss-leading bid in anticipation of a successful re-negotiation procedure afterwards. What is it? Country – Bribes demanded at the Government/Ministerial level Municipal – Bribes for contracts, bribes for services or for avoiding billing/penalties Corporate – Companies bribing in order to gain contracts When does it take place? Water allocation and billing – Avoidance of bills, setting up illegal connections, getting access, etc Regulation – Avoidance of penalties over illegal abstraction/connection, discharges, etc Procurement and contracting – Bribes for the award of goods/service provision contracts During the privatisation process – Bribing to influence the tendering/award process Why is it wrong? It needs to be spelt out that corruption hampers service provision, affordability and the efficiency of service provision, along with public health and environmental implications. For politicians, companies and municipalities this does mean acknowledging that corruption occurs both in the public and private sectors and that it is measurable. While ‘moral’ corruption may be seen by some as ‘part of the game,’ it has consistently undermined confidence in the PSP contract award process and has unduly politicised the re-negotiation process. Transparency International’s Business Perception Index (‘BPI’, how businesses from varying countries are seen when dealing in developing economies - surveys in 1999 and 2002) and annual Corruption Indexes (a synthesis of national surveys on the perception of corruption within each country) are a useful starting point. It is of interest to note in the 2002 BPI survey that public works / construction scored the lowest of all categories given, with 46% of all recipients stating that this sector was seen as likely to offer the biggest bribes. Consistent bidding and financing criteria Bid criteria need to be developed that are applicable in developed and developing economies. The greater the replicability of contract types and procedures, the less scope there is for abuse to take place as all parties are increasingly familiar with the system, especially those involved in overseeing the probity of the bidding process. This also reduces the cost of independent scrutiny and would allow for such scrutiny to take place on a regional basis. Talks have been going on since at least 1998 about developing commonly accepted definitions/templates for contract types, so that all interested parties know what is going on at each point in the contract development and negotiation process. This process needs to be expedited with the aim of developing legally binding (and therefore fungible or supra-national) contract definitions that could be brought into play by the World Bank and regional banks (‘regional’ refers to groupings of countries). A re-evaluation of renegotiation attitudes and procedures Re-negotiation of contracts is seen by stakeholders and NGOs as a cynical attempt to maximise profits once the contract award process is out of the way. There is no doubt that water contracts in developing economies are more volatile than most. Between 1990 and 2001, 3.5% of World Bank funded water contracts were cancelled against 1.9% for infrastructure projects in general. In value terms the difference is even more marked: 11.3% for water versus 3.2% for infrastructure projects overall. During the same time, 71% of 89 World Bank supported concessions were renegotiated, 5% by the companies and 66% by the Governments. While almost all contracts were subject to a bidding process, regulation was generally notable by its absence. A formal re-negotiation process needs to be built into contracts, based upon agreed-on performance and price criteria. Such a process can work both ways, as when circumstances swing favourably in the concession’s direction (some currencies appreciate against the US Dollar over time), this ought to release a mechanism to compensate for previous adjustments where appropriate.



Windows of transparency (1): Regularising bidding and negotiation procedures

Contract Stage Information placed in the public domain Call for tender Tender documents & bid criteria Bids received Ballpark figures (non company specific) Final bids received Ballpark figures (more specific) Award of contract Relate award to bid criteria Announcement of terms Explain any changes to original bid criteria Announce regulatory process Criteria and current performance data Contract commences Performance prior to PSP Quarterly / half year key criteria Critical issues highlighted Annual review Regulatory returns & independent reviewing Outstanding issues highlighted Performance against targets, new targets

In each case, the idea is to release information to interested parties in an open, consistent and controllable manner. Once final bids are in, competitive secrecy is of historic importance. If pre-award negotiations need to take place, stakeholders need to have confidence in this process. The entire process can be extended into making clear to all parties the criteria that are to be material when bringing the re-negotiation process into play. Communicating best practice This calls for a holistic approach to countering corruption. The regulatory climate in England and Wales may be onerous, but no stakeholder could reasonably complain about being deprived of data. Comparative data of increasing accuracy (and methodological rigour) at all operational levels not only creates an unrelenting drive towards ‘ideal’ operational efficiency; it also makes it increasingly hard for financial malpractice to take place. Windows of transparency (2): Eliminating malpractice, rewarding efficiency National/regional database for: Best practice – specific examples of utility performance and their replicability Benchmarking – developing comparative criteria (avoiding Ofwat’s ’cult of the comparator!) Operational efficiency – knowing what a system can deliver under given circumstances Global database for (PPP weighted, as appropriate): Cost of technology – ballpark figures for widely used technology Cost of construction – what it costs to build/install units of infrastructure Cost of professional services – general range of expected costs The latter will doubtless prove particularly contentious. In reality, this refers to hourly rates and so on, since flexibility and experience is essential in professional services, especially when dealing with more inexperienced clients. Engaging NGOs and stakeholders NGOs (Non Governmental Organisations) need to be made part of the reporting process. Attacking corruption is in their interest and as it is also in the interest of reputable PSP players, they have little to fear from each other. One of the reasons for faltering levels of ODA (Overseas Development Assistance) in recent years, especially in water and sanitation, is the feeling that money is not being spent where it ought to go. Giving NGOs access to information through the mechanisms outlined in 3.3–3.5 above will allow confidence in the process to be built. They also have a role to play in whistle-blowing at all levels of malpractice. It is essential that the private sector have a formal set of procedures to protect people within their companies who wish to expose corruption. Stakeholders, especially customers also need to be formally involved within this process. Therefore a reporting mechanism needs to be set up for reporting their concerns about corruption (and other concerns about service delivery). The NGO community has a role to play here, along with liaising with the regulators to ensure that such information is channelled in a controlled manner. Regulators and regulation Independent regulators are essential. As the UK experience has shown, regulation is not cheap (Ofwat is arguably an industry in itself) and it takes time for a regulator to know its market. It places a great emphasis on efficiency and meeting targets, both of which minimise the scope for corruption. In Scotland, the Water Commissioner is adopting a similar approach with the state-held Scottish Water, demonstrating that regulation and reporting can take place within the public sector. This experience has highlighted why municipal entities need to be exposed to independent regulation. Regulation of a suitably robust nature (and allied reporting systems) needs to be in place before the privatisation process starts. Perhaps the initiation of such schemes ought to mark the effective beginning of the privatisation process. These reporting systems need to be developed on a tripartite basis (economic regulation, water quality



and service delivery and environmental protection and resource management), ensuring that the various reporting functions operate independently of each other, so as not to compromise their separate interests. To address the cost of regulation, the World Bank, regional development banks and other interested parties should support the setting up of regional regulators along with supporting capacity building for analytical and comparative work. These regulators would be responsible for developing comparative data on a regional basis and assisting the implementation of a national regulator for each country where PSP is about to take place. Opening windows of transparency If confidence in the bidding process is undermined by its perceived opacity, then windows of transparency ought to be opened at suitable stages in the process as outlined in this section, allowing stakeholder scrutiny and building external confidence in the process. Too much is said about commercial secrecy. As CR notes, healthy competition is the scourge of corruption. Free economies deserve freedom of disclosure and the right to make a free choice based on information which stakeholders and NGOs can also have confidence in. A number of mechanisms exist which can be used to ensure the generation of such information is part of the privatisation process. For example, certification with the ISO 9000 (total quality management) and ISO 14000 (environmental management systems) standards, externally audited by an international agency ought to be required within a given timeframe. Externally recognised and monitored operational quality criteria have a significant role to play in the capacity and confidence building process. This means that the OECD Convention needs to be an integral part of each process (the 1998 Convention on Combating Bribery in International Business Transactions), placing pressure upon countries that have yet to adopt it. The World Bank’s 1996 Guidelines for Procurement under IBRD Loans and IDA Credits remain valid and need to be seen as an effective sanction against potential transgressors. Concern has also been expressed about perceived information asymmetries that favour private sector companies with a wide experience of market conditions and strategies. This can lead to stakeholders to regard the bidding (and re-negotiation) process with scepticism. These concerns are best addressed through a capacity building programme designed to ensure that local and national interests are suitably addressed, while a formal disclosure system before, during and after the privatisation programme allows stakeholders to have the information they need to be able to constructively engage with the service provider, the private sector and the regulators. Many of the mechanisms called for are necessary for building up competitive domestic markets along with the ability to compete effectively on a regional basis. Therefore the capacity building exercise will benefit the local private sector as well as the regulators and NGOs. The need for independent and unbiased analysis of the role PSP can play in assisting the aim of universal service provision, as well as the challenges facing the private sector remains paramount. The absence of such research undermined the credibility of the Kyoto process and must not continue to be allowed to undermine the credibility of the private sector as a whole.


APPENDIX 3:

THE PRIVATE SECTOR AND THE MILLENNIUM DEVELOPMENT GOALS

APPENDIX 3: THE PRIVATE SECTOR AND THE MILLENNIUM DEVELOPMENT GOALS


APPENDIX 3: THE PRIVATE SECTOR AND THE MILLENNIUM DEVELOPMENT GOALS In order to move forward on this contentious issue, a multi-stakeholder review should be undertaken. We believe that it is only through such a review (similar to the World Commission on Dams) that the final, authoritative word can be made on whether PSP benefits the poor. We also believe in the necessity of building the capacity of civil society actors to influence privatisation processes and to hold governments and the private sector to account. This needs to start with improving their knowledge and understanding of the issues surrounding failing water services, and enabling civil society groups around the world to learn from each other’s experiences of intervention in privatisation processes.’

Source: New Rules, New Roles: Does PSP benefit the poor? Tearfund, 2003 This Appendix contains some personal thoughts about issues affecting the private sector and the need for it to play an appropriate role in assisting extension of access to safe water and sanitation services over the next two decades. 2000-02: The World Water Vision The World Water Vision for 2025 was launched at the Second World Water Forum at The Hague in March 2000. It was designed to represent a multilateral and multinational consensus for gaining universal access to water and sanitation by 2025. In September 2000, 189 United Nations member states adopted the Millennium Development Goals (MDGs), including to ‘Halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation.’ The Second Earth Summit in Johannesburg (2002) ratified the MDG targets and as with The Hague’s World Water Vision, emphasised the role of the private sector in providing financial and management resources. According to figures developed by the World Bank in the late 1990s (for basic services) and various sources in the EU and the USA (enhanced services), the funding needs identified for providing basic (driven by public health concerns) or enhanced (driven by environmental standards) water and sanitation services over the coming decade are as follows:

US$ billion required Basic services Enhanced services Asia 220-300 10-30 Latin America 200-250 0 Africa 80-100 0 Middle East 45-65 0 Eastern Europe 30-50 0-20 N America & W Europe 25-35 300-450 Total 600-800 310-500

The World Water Vision for 2025 was launched at the Second World Water Forum at The Hague in March 2000. It was designed to represent a multilateral and multinational consensus as to the best way to address water problems by 2025. Prior to the World Water Vision, traditional assumptions for private sector participation (World Bank) expected to see the private sector contribute 5-15% of funding needs in developing economies. This is equivalent to US$4-12 billion pa. The increase in forecast capex needs from US$30 billion to US$80+ billion pa has been accompanied by an increase in the anticipated scope for private sector finance to US$10-20 billion pa. Such a financial commitment will not take place unless adequate investment conditions exist and these require private sector participation in the management of these services. WWV 2025: Water, sewerage and sewage treatment spending, 1995 to 2025 The need for basic service provision

Developing countries 2000 2025 Population (million) 4,760 6,530 Lacking safe water (million) 1,300 330 Lacking sanitation (million) 2,600 330 Forecast Investment (US$ billion pa) 70-80 180

Water and sewerage spending, 1995 to 2025

US$ billion pa 1995 2000-25 Drinking water 17 17 Sanitation 1.5-2.5 15 Wastewater treatment 11.5 50-60 Total 30 82-92

Source: Prynn P & Sunman H, Getting the water to where it is needed and getting the tariff right. FT Energy Conference, Dublin 11-2000.



The World Water Vision assumes that US$2,050-2,300 billion in total needs to be invested over a 25 year period. Assuming that all contracts will be debt financed (where PSP is being used, it will in fact be 70-80% debt financed), and on the basis of 7% for servicing the cost of assets, 10% for the operation of these assets and an overall return of 5% on assets for debt repayment and returns for the private sector where appropriate, this points to costs of 22% on the total investment. This could point to a market with US$450-500 billion per annum in the developing economies. Assuming in reality that US$40-50 billion each year will be spent (factoring in the private sector’s ability to bring the cost of capex down by 15-25%), this still points to a market worth US$220-275 billion pa by 2025. There will be 7.7billion people in developing economies by 2025, with approximately 2.9 billion living in urban areas. This equates to US$75-95 per person per annum, which is a fairly demanding figure for these economies. The problem is that the World Water Vision figures assume that US$500 per capita needs to be spent ‘conservatively’ to connect all people to water and sewerage services in urban and rural areas. To halve the proportion of people without a safe water supply by 2015, an estimated US$19 billion to US$34 billion per year would be required, depending on the approach taken in each particular case. Based on the provision of basic sanitation for the poor, US$12 billion would be needed per year. Currently total overseas development assistance (ODA), runs at US$53 billion a year. The question here is: how much ODA will ever be directed at ‘unglamorous’ sectors such as water and sewerage? 2003: Kyoto’s road to nowhere? There were 406 sessions at the World Water Forum in 2003. Of these, 12 sessions covered finance, along with 15 on the private sector and six sessions devoted to opposing private finance. There was one session on industry and water. It was no great surprise to find that no regional or national targets for water and sanitation coverage were considered. This sums up the piecemeal nature of 2003. In June 2003, the European Parliament is seeking to create a European Water Fund of €1 billion from both public and private sources to fund water supply and purification in developing countries. Paul Lannoye MEP, the European Parliament’s Rapporteur on water management saw the proposed sum as inadequate and suggested that a tax of €0.005 on every bottle of mineral water sold in Europe. In May 2003, The Group of Eight’s (G8) “Water Action Plan" called for efforts to secure more safe drinking water but declined to provide funds. The G8's offered to support countries that prioritised safe drinking water. The G8 added they would promote public-private partnerships (PPPs), where appropriate. What aid there is does not to appear be going where it is needed most. A survey carried out for the OECD in 2002 (OECD (2003) Aid activities in the water sector 1997-2002, OECD Paris, France) found that 12% of all aid going to the water sector that year went to countries where less than 60% of the population had access to safe water. Annual aid going into water is some US$3 billion, with another US$1.5 billion in loans. The largest donor is Japan, which gives 33% of total water aid and has an extended loan programme to complement the funding. 2005: The UN ‘Water for Life’ decade The United Nations International Decade for Action, “Water for Life”, 2005-2015 will be launched at World Water Day, 22 March 2005. The Decade for Action is designed to highlight the disparity between progress to date and the work needed to attain the water and sanitation MDGs as highlighted in the 2004 study by UNICIEF and the WHO. Again, the UN explicitly recognises the contribution needed from the private sector to attain these goals. The Fourth World Water Forum, is to be held in Mexico in March 2006, is set to be a crucial engagement between the private sector and various stakeholders for the implementation of effecting management strategies. Towards 2015 and 2025: Industry Initiatives Noted World Business Council on Sustainable Development In March 2004 the WBCSD launched a two year council project on water to define the business contribution to the debate. WBCSD (2004). Water and sustainable development: a business perspective. PSP Water ‘Policy Principles and Implementation Guidelines for Private Sector Participation in Sustainable Water Supply and Sanitation Services’ launched in April 2004 by the Swiss Agency for Development and Cooperation (SDC), the Swiss State Secretariat for Economic Affairs (SECO), and Swiss Re. PSP Water seeks to propose formal approaches for private sector participation (PSP) at the policy, operational and practitioner level, based on work being carried out since 2002. The final reports are due to be published in November 2004. Global Water Scoping Process Jointly developed by ASSEMAE (Brazilian Association of Municipal Water and Sanitation Public Operators), Consumers International, Environmental Monitoring Group, Public Services International, RWE Thames Water,



BPD and WaterAid. A scoping report has been published and a workshop held in Berlin in June 2004 decided that this project is to be taken further. Urquhart P. & Moore D. (2004). Global Water Scoping Process: Is there a case for a multi-stakeholder review of private sector participation in water and sanitation? Business Partners for Development BPD is British based, with a global membership. The Water and Sanitation Cluster covers water and wastewater issues. A Tri Sector Partnership approach developed in a 1998-2001 study, looking at the potential of business working with governments and civil society for promoting sustainable development. A series of five brief reports were published in 2002. BPD is concentrating on developing partnerships at the local level. The World Economic Forum The WEF’s Water Initiative was launched in June 2003. It covers three areas: The Water Project Exchange (joint projects between the private sector and other stakeholders); The Water Practices Exchange (highlighting good corporate practice in water management) and; The Water Business Case (promoting market based instruments for water and watershed management). The Green Globe Network The Green Globe Network assists UK Government’s international sustainable development activities by providing advice and information, organising meetings and seminars, and by developing proposals for new policy initiatives. It was established in 1997 by the Foreign Secretary and is funded by the Foreign and Commonwealth Office. It also has links with other government departments. The water and sanitation Millennium Development Goals were taken on as part of their 2003-04 work programme. The Green Globe Network is run by the Green Alliance. Other related initiatives under development Rabobank Netherlands has been developing financing mechanisms for allowing private investment in water service extension in more high risk markets. This is currently at the proposal stage. The International Institute for Economics and Development (IIED) is currently preparing a survey of urban water and development issues. This will be published by the end of 2004.


APPENDIX 4:

GLOSSARY OF WATER AND FINANCE TERMS AND ABBREVIATIONS

APPENDIX 4: GLOSSARY OF TERMS AND ABBREVIATIONS


APPENDIX 4: GLOSSARY OF WATER AND FINANCE TERMS AND ABBREVIATIONS

Abstraction. The taking of water from surface water (rivers, lakes and reservoirs) and groundwater (boreholes and springs from water bearing rocks such as chalk, limestone and sandstone). Acre-Feet. Expression used in the USA to describe groundwater resources. 1 acre foot = 1.482 Ml (1,482 m3) ADB. African Development Bank/Asian Development Bank. Affermage. See Lease. AMP. Asset Management Period, the five yearly operating cycles in England and Wales set out by Ofwat, the industry regulator since 1989. AMP4 runs from 2005-10. Ammoniacal nitrogen (NH3). Ammoniacal nitrogen is often found in water as a result of the discharge of sewage effluent with high levels affecting the quality of fisheries. Aquifer. Rock and soil which holds water, an underground water source for groundwater. Artesian. Water abstracted from groundwater resources. ASEAN. Association of South-East Asian Nations. Asset Sale. The full privatisation of utility services via the outright sale of their assets and an operating licence to shareholders or to a private sector company. This is known as the ‘British Model’ after the 1989 privatisation of the WASCs of England and Wales. Placing the operating assets in private hands in perpetuity has proved politically very contentious and, as a result, has not been used elsewhere, save in Chile and to a lesser extent, in the Czech Republic and in Belize. ATO. Ambito Territoriale Ottimale. The ideal area for water and wastewater contracts in Italy as designated by the 1994 Galli Law. This law broadly seeks to rationalise some 6,800 water distribution regions into a more manageable 89. BATNEEC/BAT. Best available technology not entailing excessive cost/Best available technology. The former’s expediencies have earned it the nickname CATNIP, or cheapest available technology not involving prosecution. Biosolids. The new expression for sewage sludge which has been processed for recycling. The latter refers to its application on agricultural land or after further treatment, as compost sold for horticulture and domestic gardens. As far as PR goes, a better term than refined human excreta. Biotic. Plant, bacterial or animal life. Biodiversity refers to the optimal diversity of species in an ecosystem. The greater the number of species in a given ecosystem in relation to its ideal number, the less perturbed the habitat is. Blue Flag. Under the EU’s bathing waters directive, designated bathing areas that meet the stricter ‘Guideline’ standard for water quality, as well as satisfying standards for safety, can be awarded a ‘blue flag’. BMO. Build, manage, operate, a form of O&M contract. BOD/COD. These are chemical/biochemical determinants of water quality. As plants and animals do not necessarily respond to numbers and engineering standards, there is a move towards complementing these criteria with a biological assessment of the water’s quality. For example, in several families of invertebrates, better water quality results in a greater degree of species diversity. Indicator species are used to measure water quality. • Biochemical oxygen demand (BOD). This is the amount of dissolved oxygen in water consumed in test

conditions over a period of five days by the microbiological oxidisation of biodegradable organic matter contained in effluent. BOD measures the amount of oxygen consumed, usually by organic pollution (mainly sewage effluent and effluents from the wood and paper industry), so lower values indicate better quality.

• Chemical oxygen demand (COD). Unlike BOD, this includes all the oxygen consumed by effluents. BOT. See Concession. ‘British Model’. See Asset Sale. CAO. Chief Accounting Officer. CAP. The Common Agricultural Policy of the European Union. Capex. Capital spending. Money spend on new assets or replacing or upgrading extant assets.



Carcinogen. A substance which is believed to be a cause of cancers in humans. CEO. Chief Executive Officer. CFO. Chief Financial Officer. Coliform bacteria. Gut living bacteria that are discharged with excreta. Drinking water contaminated with coliform bacteria is the main cause of diarrhoea and other intestinal infections. The most useful indication that sewage effluent is being discharged into a body of water. Combined sewers. A sewer that carries both sewage and s torm water runoff. Common Ownership. A form of privatisation where the operating assets are corporatised and a minority of the shares in the asset-holding company are offered to one or more private sector companies. This is known as Kooperationmodel or the German Model. A further variant is the Beteribermodell, where the private sector operator pays a fixed rate for the right to operate the services. Concession. The granting of the right to operate given utility services for a locality for an agreed period of time. Unlike outright privatisation (see Asset Sale), the assets are transferred to municipal ownership at the end of the concession’s life. In a full utility concession, the collection of water and sewerage tariffs is included. There are also three main variants of the concession model (BOO, BOT and BOOT) where tariff collection usually remains in municipal hands. These versions are typically seen where the municipality needs private sector finance and management for new facilities. • BOO (Build Own Operate). The private sector company builds, owns, maintains and operates the facility for

the length of its operating life. • BOOT (Build Own Operate Transfer). Similar to the BOO contract, save that the private sector company

hands over the assets to the municipality at the expiry of the concession. • BOT (Build Operate Transfer). Similar to the BOT except that the private sector company hands over the

assets to the municipality on completing construction work. COO. Chief Operating Officer. Corporatised. A utility that is in municipal ownership while being run in a manner similar to that of a private sector entity. A corporatised utility will be structured as a limited liability company, with its share capital controlled by the municipality, while publishing the equivalent of an annual report replete with a profit and loss account, balance sheet and cash flow data. Cryptosporidium. Parasitic micro-organisms which live in water and are a cause of diarrhoea. The presence of ‘crypto’ is arguably an indicator of an under-maintained distribution network. CSD. Commission on Sustainable Development of the UN. DBO. Design, Build and Operate. A form of BOT concession. DBOT. Design, Build, Operate and Transfer. A variant of the BOT contract incorporating the design of the facility. Digestion. Process for stabilising sewage sludge before application to land. Digestion involves heating the sludge to 40oC to reduce the number of bacteria and pathogens. Anaerobic digestion (see Pasteurise) generates methane, which can be extracted for energy recovery. Distribution Loss. Non-contentious expression for leakage (q.v.). Dry tonne. Sewage sludge or industrial effluent after all water has been removed. This is the standard measure used for comparing sewage sludge generation and disposal statistics. EBITDA. Earnings before interest, taxation, depreciation and amortisation. EBRD. European Bank for Reconstruction and Develop. Loans for municipal and private services, with an emphasis on the EU candidate countries. Ecosystem. The community of organisms associated with a particular habitat. It ought to be noted that there is no such thing as ‘ecological’, as in ‘ecologically friendly’, since ecology is the science of studying the environment. Expressions such as ‘environmentally sound’ do, however, make sense. Effluent. Liquid wastes typically discharged into a body of water. Strictly speaking, it is the liquid discharged from a wastewater treatment plant into a body of water, which is meant to meet various quality criteria.



EIB. European Investment Bank. Loans for municipal and private enterprises, priority within the EU. EPA. (National) Environmental Protection Agency. EU. The European Union’s directorate general for environmental issues is DG XI. The EU acts as a driver for and against water quality. In subsidising inefficient forms of industrial (intensive) agriculture, it is possible that the EU’s Common Agricultural Policy (CAP) does more damage to water resources than all of DG XI’s environmental initiatives combined. Eutrophication. The process by which lakes and ponds become enriched with dissolved nutrients , resulting in increased growth of algae and other microscopic plants. Nitrogen and phosphorous enrichment of water, which causes algal growth to extend beyond that associated with the particular aquatic environment. Degrades the quality of the ecosystem and impairs water quality. The main causes are industrial agriculture (fertilisers and slurry) and excess effluent discharges. Evapotranspiration. The removal of water from a surface through evaporation. FAO. Food and Agriculture Organisation of the United Nations. ‘French Model’. Also known as affermage, (see Lease). Fresh water. Water that contains less than 1000 milligrams per litre of dissolved solids such as metals and nutrients . FY. Financial Year. GEF. Global Environment Facility (World Bank)/Global Environment Fund (privately held). ‘German Model’. Also known as Kooperationmodel and the Beteribermodell (see Common Ownership). GDP. Gross domestic product Groundwater. The supply of fresh water found beneath the earth's surface (usually in aquifers ) which is often used for supplying wells and springs . Groundwater recharge. The inflow to an aquifer. Habitat. United Nations Centre for Human Settlements (see UNCHS). Hague. The second global water summit, held in the Hague in 2000. Unveiled the 2025 target for universal water and sanitation provision, allied with greater private sector investment. IADB. Inter-American Development Bank. Development Bank primarily concerned with financing infrastructure projects in Central and South America. IFC. International Finance Corporation (World Bank, investment banking and privatisation). IMF. International Monetary Fund – encourages the sale of assets as part of state refinancing. Inset Appointment. Term for water provision contracts awarded to a new company within an incumbent company’s service area. A form of water service provision competition, mainly seen in the UK. IPO. Initial Public Offering, whereby a company’s shares are listed and subsequently traded on a recognised stock exchange for the first time. IPPC. Integrated pollution prevention and control regulates the discharges from industrial processes into the air, land and water. ISPA. Instrument for Structural Policies for Pre-Accession. EU funding for Accession Candidates, providing up to 75% of the cost of transport and infrastructure projects. IWRM. Integrated Water Resources Management. Johannesburg. The Second Earth Summit was held at Johannesburg in 2002. Targets to halve the proportion of people not connected to water or sanitation by 2015 were agreed.



K. The percentage above (or below) the Retail Price Index that Ofwat allows a water company in England and Wales to alter is fees in a given year. This has evolved from the ‘RPI-X’ regulatory model pioneered by Oftel when British Telecommunications was privatised in 1984 and is an example of price driven regulation as opposed to the rate of return model used in the USA. Kyoto. The third global water summit was held at Kyoto in March 2003. Despite hopes that it would develop a framework to implement the Hague and Johannesburg proposals at the country level, little of substance took place. The fourth global water summit is expected to be held in 2006. 1 Litre Leakage. Loss of water through the distribution system either at joins between pipes or due to cracks in pipes. Because the perceived wastage of water is a contentious subject, definitions of leakage rates tend to vary. Pipes are affected by cold weather (ice-cracking) and dry weather (subsidence) as well as structural deterioration. Approximately one third of leakage takes place within the customer’s pipe network. It is als o affected by water pressure, leading to a pay-off between water supply pressure and leakage rates. Lease (Affermage). Privatisation model pioneered in France whereby the private sector company rents the assets from the municipality for a given length of time. The municipality is responsible for investment while the company does the tariff collection. In France, this evolved into a form of concession model, with the company carrying out an agreed programme of asset improvements over the life of the contract. m3 Cubic metre, or 1,000 litres. Measure of water volume. One cubic km is one million m3. Mains. Pipes that carry treated drinking water to the customer’s supply pipe via a connection pipe. Also called the distribution mains. Management Contract. The simplest form of privatisation, where the private sector company provides management support for the operation of the assets. Usually seen as a means for the private and public sector entities to get to know each other. MENA. Middle East and North Africa. Ml/day. Megalitres per day (1,000m3 per day). Measure of water availability. Monitoring Techniques. Monitoring needs to take greater account of water quality in biological, not chemical terms. Sometimes this is good for standards – lowland, slow flowing rivers can have low levels of dissolved oxygen – but usually this will mean tighter criteria. Mt/pa. Million tonnes per annum. MWA. Municipal Water Authority. The body controlling the water and wastewater service activities in Bangkok, Thailand. N/A. Not Available. Nitrates (NO3). Nitrates are formed naturally in the soil by micro-organisms, but are also produced industrially and used as fertilisers. Nitrates are the nutrients, which in most saline waters control the production of algal growth with high levels of nitrates in the water causing eutrophication through algal and macrophyte growth. Furthermore 'blue baby disease', an affliction of the blood’s oxygen-carrying capacity, is associated with drinking water containing nitrogen in the form of nitrates. NGO. Non Governmental Organisation. O&M (Operation and Maintenance). A step further from management contracts, but not a privatisation in the sense of a concession or asset sale. Here the private sector company operates and maintains the extant assets for a given period of time, but is not involved in the development of these assets or new facilities. ODA. Overseas Development Assistance. Infrastructure development aid. OECD. Organisation for Economic Co-operation and Development. Global grouping of 24 more developed economies. OFWAT. Office for water services, the water regulator for England and Wales. Opex. Operating expenditure. Money spent maintaining the extant infrastructure and using it to provide a service. PAH. Polyaromatic hydrates. A toxic industrial pollutant of increasing concern in EU and WHO water quality assessment criteria.



Parastatal. A state held entity that operates at least nominally independently of the state. A parastatal may also operate as a corporatised (q.v.) entity. Pasteurise. Sewage sludge which is more extensively treated than digested sludge (q.v.). After heating the sludge to 60oC for several days, all pathogens and bacteria are removed, making it satisfactory for a wide range of agricultural applications. The main techniques are known as anaerobic digestion and composting. Pathogen. An organism which is capable of causing a disease. PCBs. Polychlorinated biphenyls were mainly used for electrical transformers. They do not degrade and are understood to be carcinogens which can bioaccumulate (build up in an organism’s body, typically in fat reserves) to a dangerous degree. Their manufacture was banned in 1977, but some 60% of all PCBs manufactured remain in use. PE. The population equivalent or amount of oxygen demand (see COD/BOD) generated and discharged by the average person each day. In a typical town, it is 1.5 to 2.0 times the population. P/E. Price Earnings Ratio (PER), a company’s share price divided by its historic financial year (FY) earnings per share. Pesticides: There are two main classes of pesticides: chlorinated hydrocarbons are long-lived and capable of being concentrated up the food chain (this is called bioaccumulation). The second group is the organophosphates which are short-lived and presumably degrade to 'harmless' end products, but whose long-term environmental impact is not yet known. Chlorinated hydrocarbons: Organophosphates: Aldrin, Endrin, Benzene, Hexachloride, Azodrin, Malathion, Parathion, Diazinon, DDT, Dieldrin, Endosulfan and others Trithiopn, Phosdrin and others PFI. Private Finance Initiative, a tool developed in the UK in the mid 1990s for awarding single projects to the private sector on a concession basis. Phosphates. Phosphates are another nutrient, responsible for the eutrophication that mostly stems from sewage effluent with the remainder mainly from agricultural inputs and from extensive use of detergents. Physicochemical treatment. The treatment of liquid wastes to reduce their environmental impact (see BOD/COD). Plumbsolvency. The ability of water to dissolve lead from piping or solder. Soft waters (e.g. granite) are more plumbsolvent than hard waters (e.g. chalk). Soft water is defined as water that has less than 60 milligrams of calcium carbonate (lime) per litre. Potable. Water that is fit for human consumption, as defined by World Health Organisation (WHO), EU or national standards. PPP. Polluter pays principle, whereby a discharger of polluting substances pays a fee relating to the pollution load discharged. PPP can either be used to encourage dischargers to minimise their pollution loads or to finance the development of an appropriate effluent treatment network. PPP. Purchasing Power Parity, a tool developed to illustrate the relative purchasing power of a common currency (in GDP per capita terms) in different economies. One US dollar goes further in India than it does in Japan. PPP. Public-Private Partnership, where the private sector manages state or municipally held assets on a partnership basis. ‘PPP’ is a common TLA (triple letter acronym) affecting the water sector. PSP. Private Sector Participation. Another TLA for PPP. PWA. Provincial Water Authority. The body controlling the water and wastewater service activities in urban areas outside Bangkok, Thailand. Raw water. Water from surface or ground sources prior to treatment. Red List. Substances deemed harmful to the environment. Their discharge into the environment is to be brought under the control of the EU’s IPPC directive. Grey List substances are of intermediate toxicity and are subject to a less stringent set of controls. Reservoir. A body of water, usually artificially impounded, for maintaining controllable supplies of raw water. Prior to distribution, it is usually sent to a treatment works to be made potable and held in a service reservoir. River basin. A term used to designate the area drained by a river and its tributaries.



Sanitary sewers. Underground pipes that carry off only domestic or industrial waste, not storm water. Septic tank. Tank used to hold domestic wastes when a sewer line is not available to carry them to a treatment plant; part of a rural on-site sewage treatment system. Sewage. Domestic sewage mainly consists of human excrement. Agricultural sewage has the same environmental impact, but its legal status is more ambiguous (as long as it is not discharged directly into watercourses). Sewage sludge. The House of Lords, in its 1991 paper on the EU’s UWWTD perhaps harks back to school when describing sewage sludge as having "the consistency of thin semolina." The principal by-product from sewage treatment. Typically consisting of 96-97% water and 3-4% dry solids, it is usually measured in terms of dry solids to allow international comparisons to be made. Sewage treatment. This usually involves a series of phases, each designed to progressively reduce the environmental and health impact of the effluent. Sewage is carried in the effluent either as solid matter or in dilute, suspended solids. While several performance criteria are used to assess the performance of a sewage treatment works (mainly, the removal of silts, BOD and ammonia), each level of treatment can be judged by its ability to remove these solids from the effluent stream prior to its final discharge. There is a fairly close relationship between ultimate solids removal and the lowering of an effluent stream's BOD. Level of treatment Process involved None and preliminary Screening out of solids Primary Settlement to remove solids from effluent Secondary Biological treatment to remove suspended solids Tertiary and advanced Further nutrient removal via filtration, etc. Level of treatment Percentage of sludge removed BOD removal None and preliminary 2% (range 0-5%) of sludge removed 0-5% Primary 30% (range 10-40%) of sludge removed 2-35% Secondary 90-95% of sludges removed 75-90% Tertiary and advanced 99-100% of sludges removed 95-98% • Preliminary / Screening. Intended to remove solids flushed down lavatories, such as condoms, tampons

and nappies. Reduces the aesthetic impact of the sludge without affecting its environmental impact. • Primary. Physical treatment, where the effluent is placed in a settlement tank, so that solids are left behind

and the liquid effluent is then discharged. • Secondary. Biological treatment, where the effluent trickles through inert materials such as slag, clinker,

gravel or more recently, moulded plastic, so that it comes into contact with micro-organisms, which oxidise and clarify the effluent.

• Tertiary. A bit of a catch-all expression, usually referring to chemical treatment. Usually concerned with the

removal of nutrients such as nitrogen and phosphorous. • Advanced treatment and disinfection. In addition, reverse osmosis membranes are being adopted where

space is at a premium. For example, for serving a bathing area directly backing onto cliffs. Treatment can be extended to include further disinfection by exposing the effluent to ultra violet light or ozone prior to its final discharge.

Sewerage. The collection and distribution network linking domestic and industrial properties with the sewage treatment system. Storm sewer. A system of pipes (separate from sanitary sewers ) that carry only water runoff from building and land surfaces. STW. Sewage treatment works. Sewage effluents are collected at a STW for treatment, with the sewage sludge being separated from water for discharge. Supply pipe. The part of the water distribution network which is on the customer’s property and thus usually owned by the customer, not the water supplier. The statutory obligations of water provision companies usually do not extend to the supply pipe. Surface water. All water naturally open to the atmosphere (rivers , lakes, reservoirs, streams, seas, estuaries ). It also refers to springs and wells , which are directly influenced by surface water.



SWC. The statutory water companies are private sector companies with a statutory obligation to provide water in England and Wales under the 1973 Water Act. Also known as water only companies (WOCs) and are distinct from the Water Plcs. TOT. Transfer, Operate and Transfer. A variant of the BOT contract where extant assets are taken over and operated for a set period of time. Trade effluent. Dilute wastewater (effluent) discharged by industry into the sewerage network. Increasingly subject to restrictions under IPPC whereby it is to be treated separately from domestic sewage. Tuck-In. Acquisitions by a major water company of small water companies within or adjacent to their service area, which are ‘tucked-in’ or integrated into their networks. Turbidity. Cloudiness caused by the presence of suspended solids in water; an indicator of water quality. UFW. Unaccounted for water. Distribution losses or leakages (q.v.), either expressed as a percentage of water put into the system or in terms of million litres per day (or year). Percentage losses are typically avoided due to their emotive impact. Often also includes illegal abstraction and unmetered supply that has not been billed for. UNCHS. United Nations Centre for Human Settlements (Habitat). Research and aid relating to urban areas. UNDP. United Nations Development Programme UNEP. United Nations Environment Programme. USAID. US direct aid programme for supporting international development project. USEPA. US Environmental Protection Agency. UWWTD. The EU’s 1991 Urban Wastewater Treatment Directive (91/271/EC). All populations of more than 2,000 to have suitable sewage treatment from 2005. WASC. Water and sewerage company, see Water Plc. Wastewater. Typically either sewage (q.v.) or an effluent (q.v.). Water that carries wastes from homes, businesses, and industries. A mixture of water and dissolved or suspended solids . Water contamination. Impairment of water quality to a degree which reduces the usability of the water for ordinary purposes, or which creates a hazard to public health through poisoning or spread of diseases. Water for Life. The United Nations’ Decade for Action to be launched on World Water Day, 22nd March 2005 for meeting the 2015 Millennium Development Goals of halving the number of people without access to improved water supplies and sanitation. Water Plc. Colloquial expression for the ten water and sewerage companies (WASCs) of England and Wales, which were privatised in 1989. Water pollution. Industrial and institutional wastes, and other harmful or objectionable material in sufficient quantities to result in a measurable degradation of the water quality. Water quality. Classification of inland waters. EU classifications range from ‘Very Good’ (IA) quality waters that have no appreciable indicators of human activities and are capable of supporting more sensitive species such as Brown Trout, to ‘Poor’ (III) quality waters that support a significantly degraded community of plant and animal species, and ‘Bad’ (IV) quality waters that (with the exception of some fungi and algae) are usually incapable of supporting life. WB. World Bank. Loans targeting services and infrastructure at the pre-privatisation phase. Broad remit to encourage cost recovery and commercialisation. WBCSD. World Business Council for Sustainable Development. Wet tonne. A weight of measure for sewage sludge or industrial effluent. In the case of sewage sludges, this usually refers to material removed from the sewage treatment process. Sewage sludge usually consists of 95-98% water, falling to 75-85% after basic drying. The variability of the water content makes wet tonnes an inconsistent measure of sewage generation, hence the use of dry tonnes when comparing sewage data. WFD . The EU’s 2000 Water Framework Directive. Inland waters to be of “good ecological quality” by 2012. Calls for cost recovery from 2010 and water management at the river basin level. WHO. World Health Organisation. Global Standards for drinking water quality.



WOC. See SWC. WRI. World Resources Institute, United States. Independent body researching the use and abuse of natural resources. WTW. Water treatment works render raw (untreated) water potable or fit for human consumption. WWC. World Water Council. Organises the triennial World Water Fora (WWF, q.v.) WWF. World Water Forum. A global gathering of people involved in water issues that as in 2000 has the potential to set the policy agenda or as in 2003 to become mired in polemic. Three have been held to date and the fourth is in preparation: WWF 1; Morocco 1997, WWF 2; The Netherlands 2000, WWF 3; South Africa 2003 and WWF 4; Mexico 2006. WWTW. Wastewater treatment works, another term for sewage treatment works.


APPENDIX 5:

REFERENCES AND FURTHER READING

APPENDIX 5: REFERENCES AND FURTHER READING


APPENDIX 5: REFERENCES AND FURTHER READING Important sources of country information are included in the relevant country entries. Information on individual companies and privatisation contract awards has been obtained from company annual reports, press releases and web sites, along with analyst briefings and visits over the past 15 years. Copious use of the following periodicals has been made: Source Water & Sanitation Weekly, the Global Water Report, Global Water Intelligence and Asian Water. General reviews The country data entries have broadly been based upon the publications below. The exceptions are where other sources are more recent, or where they have provided information not available in these publications. ADB (2003) Water in Asian Cities, Asian Development Bank, Manila, Philippines Cairncross S, ed. (2003) Water & Sanitation in the Worlds Cities: Local Action for Global Goals. United Nations Human Settlements Programme. UN-HABITAT, Earthscan, London Cosgrove W. J. & Rijsberman F. R. (2000) World Water Vision (Earthscan, London) GEO-3 (2002) Global Environment Outlook 3. UNEP, Earthscan, London, UK Gleick, P.H. et al. 2002. The World's Water 2002-2003: The Biennial Report on Freshwater Resources. Island Press, Washington, D.C. Human Development Report 2003. Millennium Development Goals: A compact among nations to end human poverty. UNDP, United Nations, New York, USA. Human Development Report 2004. Cultural Liberty in Today’s Diverse World. UNDP, United Nations, New York, USA. Mcintosh, A. C. (2003) Asian Water Supplies: Reaching the Urban Poor. Asian Development Bank / IWA Publishing, London Owen, D A Ll (2002). The European Water Industry: Market Drivers and Responses. CWC Publishing, London. United Nations (2002) World Urbanization Prospects: The 2001 Revision; Data Tables and Highlights. Population Division, New York, Department of Economic and Social Affairs, UN Secretariat UNCHS (HABITAT), (2003) The Challenge of Slums: Global; Report on Human Settlements 2003. United Nations Human Settlements Programme, UN-HABITAT, Earthscan, London UN Habitat (2003) Water and Sanitation in the World’s Cities: Local Action for Global Goals, Earthscan, London, UK UNCHS (HABITAT) (2001). Cities in a Globalizing World: Global Report on Human Settlements, 2001. Earthscan, UK. UNESCO (2003) World Water Development Report - Water for People, Water for Life Water Supply and Sanitation Collaborative Council (2004) Resource Pack on the Water and Sanitation Millennium Development Goals, WSSCC, Geneva, Switzerland WHO (2000). Global Water Supply and Sanitation Assessment. WHO, UNICEF & WSSCC, USA. WHO (2004) Guidelines for Drinking-water Quality. Third edition. WHO, Geneva World Bank (2003) Water Resources Sector Strategy: Strategic Directions for World Bank Engagement, World Bank Washington DC, USA World Bank (2003) World Development Report, 2004: Making Services Work for Poor People, World Bank, Washington DC, USA World Development Report 2003 (2002). Sustainable Development in a Dynamic World: Transforming Institutions, Growth, and Quality of Life. WRI, UNDP, UNEP, World Bank, OUP, Oxford, UK.



World Development Report 2004: Making Services Work For Poor People. WRI, UNDP, UNEP, World Bank, OUP, Oxford, UK. World Development Report 2005: A Better Investment Climate for Everyone. WRI, UNDP, UNEP, World Bank, OUP, Oxford, UK. WRI (2003) World Resources, 2002-04: Decisions for the Earth. World Resources Institute, Washington DC, USA Economics and Policy Collignon, B & Vezina, M (2000). Independent Water and Sanitation Providers in African Cities. World Bank, Washington DC, USA. Cosgrove, W J & Rijsbnerman, F R (2000). World Water Vision: Making Water Everybody’s Business. WWC, Earthscan, UK. In addition, 18 regional documents were published in 1999. Dole, D. and Bartlett, I. (2004). Beyond cost recovery: setting user charges for financial, economic, and social goals. (Technical note /ERD-ADB; no. 10). Manila, Philippines, Asian Development Bank. Foxwood, N. and Green, J. (2004). Making every drop count: an assessment of donor progress towards the water and sanitation target. Teddington, UK, Tearfund. 72 p. Hutton, G & Haller, L (2004) Evaluation of the costs and benefits of water and sanitation improvements at the global level. WHO / SDE / WSH. World Health Organization 2004 IIED (2002) Financing for Sustainable Development. IIED, London. McGranahan, G. et. al. (2001) The Citizens at Risk: From Urban Sanitation to Sustainable Cities, SEI / Earthscan, London UK Nigan A. (1996) ‘Sustainable financing of WATSAN’ 22nd WEDC Conference, WEDC, Loughborough, UK OECD (2002) Environmental benefits of foreign direct investment: A literature review, OECD Paris, France OECD (2003) Aid activities in the water sector 1997-2002, OECD Paris, France OECD (2003) Improving Water Management: Recent OECD Experience, OECD, Paris, France OECD (2003) Social Issues in the Provision and Pricing of Water Services OECD, Paris Palmer K, Cockburn M, Storer D & Hulls D (2003) Funding Johannesburg – Beyond the Rhetoric, Delivering the Water and Sanitation Targets Cambridge Economic Policy Associates, Cambridge, UK Pieris, M E (1994). Water treatment for high incomes, in ‘Affordable Water Supply & Sanitation’, 20th WEDC Conference, Colombo, Sri Lanka, 1994. WEDC, Loughborough University, UK. PricewaterhouseCoopers (2001) Water: a World Financial Issue – A Major Challenge for Sustainable Development in the 21st Century. Sustainable Development Series. Paris, PricewaterhouseCoopers. Prynn P. & Sunman H, (2000) ‘Getting the water to where it is needed and getting the tariff right’ (Financial Times Energy, Conference, Dublin, November 2000) Tearfund (2001) Running on Empty: A call for action to combat the crisis of global water shortages. Tearfund, Teddington, UK Tearfund & WaterAid (2002) The Human Waste: A call for action to combat the millions of deaths caused by poor sanitation. Tearfund, Teddington, UK Terry G. & Calaguas B (2003) Financing the Millennium Development Goals for domestic water supply and sanitation. WaterAid, London, UK Tynan N. & Kingdom B. (2003) A Water Scorecard: Setting Performance Targets for Water Utilities. Public policy for the private sector Note 242, World Bank (April 2002): 2 WaterAid & Tearfund (2003) New Rules, New Roles: Does PSP benefit the poor? Tearfund, Teddington, UK



Winpenny J. (2003) ‘Financing water for all. Report of the World Panel Financing Water Infrastructure, Chaired by Michael Camdessus’ Global Water Partnership / World Water Council / 3 rd World Water Forum History Allan, J A (2002). The Middle East Water Question. Taurius, London. Barty-King, H (1992). Water, The Book. WSA, London. De Villiers M (1999). Water Wars. Weidenfeld & Nicholson, London. Jacobson, Charles D., and Joel A. Tarr. 1996. "No Single Path: Ownership and Financing of Infrastructure in the 19th and 20th Centuries." In Ashoka Mody, ed., Infrastructure Delivery: Private Initiative and the Public Good. Washington D.C. World Bank. Tynan, Nicola. 2002. "London's Private Water Supply, 1582-1902." In Paul Seidenstat, David Haarmeyer, and Simon Hakim, eds., Reinventing Water and Wastewater Systems: Global Lessons for Improving Management. New York: John Wiley and Sons, Inc. Private sector participation Bitran G.A. & Valenzuela, E.P. (2003) ‘Public Services in Chile: Comparing Private and Public Performance’. Public Policy for the Private Sector Note 255, World Bank, Washington DC, USA Budds, J. & McGranahan, G. (2003) Privatization and the provision of urban water and sanitation in Africa, Asia and Latin America. Human Settlements Discussion Paper Series. Theme: Water-1. IIED, London. Dalton G. (2001) ‘Private sector finance for water sector infrastructure: what does Cochabamba tell us about using this instrument?’ Water Issues Study Group, School of Oriental and African Studies (SOAS), University of London (Occasional Paper No 37, 2001) Fellows W. et al (2003) Reforming the Nigerian Water and Sanitation Sector. 29th WEDC International Conference Abuja, Nigeria, 2003. WEDC, Loughborough, UK Finger, M. & Allouche J. (2001) Water Privatisation, Spon Press, UK. Franceys, R (1997). Private Sector Participation in Water and Sanitation Services. Water Resources Occasional Paper No. 3, WEDC, Loughborough University, UK. Guash, J.L., Laffont, J-J. & Straub. S. (2003) Regulation of Concession Contracts in Latin America. World Bank Discussion Paper, Washington DC, USA. GWP (2000) TEC Background Paper No 4: Integrated Water Resources Management. Global Water Partnership, Stockholm GWP (2003) TEC Background Paper No 8: Poverty Reduction and IWRM. Global Water Partnership, Stockholm Harris, C., Hodges, J., Schur M. & Shukla P. (2003) ‘Infrastructure Projects: A Review of Canceled Private Projects’ Public policy for the private sector Note 252, World Bank (January 2003) Harris, C., Hodges, J., Schur M. & Shukla P. (2003) ‘Infrastructure Projects: A Review of Canceled Private Projects’ Public policy for the private sector Note 252, World Bank (January 2003): 4. Johnstone, N. & Wood, J. (2001). Private Firms and Public Water, IEED, London, UK Johnstone, Nick and Libby Wood (2000), 'Private Sector Participation in Water and Sanitation: Realising Social and Environmental Objectives in Developing Countries', Edward Elgar (forthcoming) Lovei, M & Gentry, B S (2002). Implications of Privatization: Lessons for Developing Countries. World Bank Discussion Paper 426, The World Bank Washington, D.C. USA. Mohajeri. S et al (2003) Aqualibrium: European Water Management between Regulation and Competition. EU, DG I, Brussels, Belgium. OECD (2000) Global trends in urban water supply and was te water finance and management: changing roles for the public and private sectors, OECD, Paris



PPIAF (2002) Private Infrastructure: A Review of Projects with Private Participation, 1990-2000. Public Policy for the Private Sector Note 246, World Bank, Washington DC, USA Sohail M. ed. (2002) ‘Public Private Partnerships and the Poor’ 8 papers, WEDC, Loughborough, UK Tremolet, S. (2003) Rural Water Service: Is a Private National Operator a Viable Business Model? Public Policy for the Private Sector Note 249, World Bank, Washington DC, USA Tynan N. (2000) ‘Private sector participation in infrastructure and the poor: Water and sanitation’ Infrastructure for Development: Private Solutions and the Poor, London, UK Tynan N. & Kingdom B. (2003) A Water Scorecard: Setting Performance Targets for Water Utilities. Public policy for the private sector Note 242, World Bank (April 2002): 2 World Bank (2002) Water Supply and Sanitation in PRSP Initiatives: A Desk Review of Emerging Experience in Sub-Saharan Africa (SSA). World Bank, Washington DC, USA Water resources Alghariani, S. A. (2003) Water Transfer versus Desalination in North Africa: Sustainability and Cost Comparison. Occasional Paper No. 49, SOAS Water Issues Study Group, University Of London Gleick, P. H. (2000) The changing water paradigm: A look at twenty-first century water resources development. Water International, Vol. 25, No. 1, pp. 127-138. HU (1998). Solutions for a Water-Short World. Population Information Program, John Hopkins University, USA. Serageldin, I (1994). Water Supply, Sanitation and Environmental Sustainability: The Financing Challenge. IBRD/World Bank, USA. Corporate approaches Suez (2002) ‘Bridging the Water Divide’ (Suez Ondeo, Paris) Thames Water (2003) ‘Planet Water’ 2nd edition, Thames Water Plc, Reading UK. Critiques Barlow M. & Clarke T. (2002). Blue Gold: The Fight to Stop the Corporate Theft of the World’s Water. The New Press, NY, USA. Gleick P. H. et al. (2002) The New Economy of Water: The Risks and Benefits of Globalization and Privatization of Fresh Water. Pacific Institute, Oakland, California Hall, D. (2004) Water Finance – A Discussion Note. PSIRU, University of Greenwich, UK Hall, D., Lobina, E. & de la Motte, R. (2003) Public solutions for private problems? Responding to the shortfall in water infrastructure investment. PSIRU, University of Greenwich, UK Hall, D., & de la Motte, R. (2004) Dogmatic Development: Privatisation and conditionalities in six countries. PSIRU / War on Want, PSIRU, University of Greenwich, UK

Documents

Water Yearbook 2004-2005 Good Com