2005 - 2006 - Pinsent Masons Water Yearbook 2012

PART 4: APPENDIX 2: PRIVATE SECTOR PARTICIPATION
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 utility. 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
377 Pinsent Masons Water Yearbook 2005-2006