WATER ABLAZE - Patagonia Sin Represas

1996 onwards, which resulted in the sale of the municipal electricity
and gas networks and over 100,000 local authority apartments to
private international corporations.
In 1999, via a complex holding structure, the private investors RWE
(Germany) and Veolia Environnement, formerly Vivendi (France),
bought a 49∙9 per-cent interest in the Berliner Wasserbetriebe (BWB),
a municipal water company, for the sum of €1·67 billion. The companies
were guaranteed an enormous annual rate of return laid down in
secret contractual documents and backed by a brand new law governing
partial privatisation.
Responsible for the privatisation deal was the grand coalition,
made up of CDU and SPD, under the overall control of finance
senator Dr. Annette Fugmann-Heesing (SPD) and Mayor
Eberhard Diepgen (CDU). The Partial Privatisation Act was drawn
up by the law firm Finkelnberg & Clemm (now White & Case).
This act was declared unconstitutional in part by the constitutional
court in Berlin – in particular the regulation of calculated returns included
in the water price. Nevertheless, these regulations were retained
in the secret contracts guaranteeing RWE and Veolia annual yields for a
minimum period of 30 years. The amount involved is proportionate to
the average yields on ten-year federal loans over the previous 20 years,
plus 2 per cent (R+2 formula) and is based on the annually-increasing
operating capital required by the water utilities: in 2007, this came
to around 8∙5 per cent based on €3∙6 billion. Following privatisation,
employees were made redundant and maintenance services drastically
reduced in order to cut costs and increase profits. In addition
to these measures, an immediate price increase of 30 per cent would
have been necessary to guarantee the promised annual rate of return.
Because the government – for political reasons – had no wish to raise
prices immediately or to such a large extent, the state of Berlin was
forced to do without part of the profits it was entitled to in favour of
RWE and Veolia. Meanwhile the public is footing the bill for this privatisation
deal through a 28 per-cent price increase.
It must also be pointed out that managerial control of the company
was handed over to the investors RWE and Veolia even
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