2005 - 2006 - Pinsent Masons Water Yearbook 2012

How Many People are Served by the Private Sector?
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PART 1: 2005-2006 OVERVIEW
To gain a reasonable picture of the status of private sector participation in water and wastewater
services requires a suitable set of operational assumptions 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 under ‘Eminent Domain’
law 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.
Pinsent Masons Water Yearbook 2005-2006