Banco Interamericano de Desarrollo

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Banco Interamericano de Desarrollo

• Financiacion de los servicios de agua y
  saneamiento
• Opciones y condicionantes
• Experiencia de un operador privado
• Charles Chaumin, SUEZ ENVIRONNEMENT

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CONTENT

• . SUEZ Environnement in Latin America
• . Major Features
• . Assessment
• . Where do we go from now ?

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19932003 A  PIONEERING  DECADE

• 1993 Buenos Aires (Argentina)
• 1994 Mexico DF (Mexico), Bogota (Colombia)
• 1995 Limeira (Brasil)
• 1996 Santa Fe (Argentina)
• 1997 Cordoba (Argentina), La Paz (Bolivia)
• 1999 Santiago (Chile)
• 2000 Manaus (Brasil)
• 2001 Cancun (Mexico)
• 2002 Puerto Rico (PR)

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SUEZ ENVIRONNEMENT A COMPLETE RANGE OF
EXPERIENCES AND PSP MODELS IN LATIN
AMERICA/CARRIBEAN

• - Service contracts Mexico DF
• Long term operation / maintenance contracts
  Puerto Rico
• Bots Mexico, Bogota
• Full concessions Buenos Aires, Santa Fe,
  La Paz
• Manaus, Limeira, Cordoba, Cancun
• - Privatization Santiago

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CONTENT

• . SUEZ Environnement in Latin America
• . Major Features
• . Assessment
• . Where do we go from now ?

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MAJOR CHARACTERISTICS OF OUR PROJECTS IN LATIN
AMERICA

• . Dramatic needs for service improvement
  /expansion
• - Inexistent / poor mid or long term planning
• - Poor/inaccurate baseline data
• . Little / no experience of PSP in country /
  sector
• Lack of regulatory instruments / regulatory
  practice
• bricks and mortar philosophy versus output
  delivery philosophy.

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MAJOR CHARACTERISTICS OF OUR PROJECTS IN LATIN
AMERICA (2)

• . Abrupt shift from all public financing to
  all private financing
• - Difficulties in understanding, accepting and
  applying full cost recovery principle and its
  implications
• - Same with cost of capital
• . Absence of or limitations on local financial
  markets
• Reliance upon international debt / capital
  markets
• Cost-effectiveness and currency risk

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CONTENT

• . SUEZ Environnement in Latin America
• . Major Features
• . Assessment
• . Where do we go from now ?

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RESULTS

• . Real delivery of service improvements and
  service expansion
• - 4.2 million connected to water / sewerage,
  
• - New waste water treatment capacity for 7
  million
• - 3 billion US CAPEX
• . Accountability of results / monitoring
• . Transparency of origin and allocation of costs
  and resources within operations and investment
• . Emergence / build up of customer / community
  awareness

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Relación Ingresos / InversiónOSN / Aguas
Argentinas
INDICE TARIFARIO En base a la tarifa nominal
promedio ajustada por IPC (Indice de Precios al
Consumidor)
INDICE INVERSION En base a los montos nominales
anuales ajustados por IPM (Indice de Precios
Mayoristas)
Nota La evolución tarifaria contiene el Suma. El
cargo está tomado como si fuese un incremento
tarifario y no una sustitución de conceptos
(Cargo de Infraestructura y los costos
diferenciales del PSI )
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CRISES
. Contract Design Crises - Buenos Aires 97-98
(Cargo de infrastructura) - Manaus (Baseline
data, Planning) . Tariff Freezes/Breach of
Contract - Limeira 1996-2000 - Argentina 2002
---? ? . Legal System Interference with Contracts
(Judicializacion) - Argentina - Manaus
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MAJOR RISKS ENCOUNTERED
. Baseline data risk . Currency risk . Breach of
contract by concedent . Financial risks to
concessionnaire and shareholders -
Performance bonds - Loans . Legal risks
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LEARNING FROM EXPERIENCE (1)
. Sustaining economic equilibrium of long term
contracts is highly challenging - Economic
shocks - Change in political objectives -
Regulatory/ legal issues . Risk allocation
through contracts finds its limits in major
change / shock situations . Private operators
obligations are enforceable, but public
authoritys are not ? Assymetry of
obligations
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LEARNING FROM EXPERIENCE (2)
. It is key to win and keep a license to
operate as private provider of a public service
- customers loyalty - community/stakeholders
relations and recognition . Private operation
and service to the poor are fully compatible .
Adherence of labour to change management is
achievable through constructive relations .
Attracting / empowering local partners to
emerging water business proves complex
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CONTENT
. SUEZ Environnement in Latin America . Major
Features . Assessment . Where do we go from now
?
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PRINCIPLES FOR SUSTAINABLE PPP CONTRACTS
. Clear, stable and durable statement,
understanding and sharing of project
objectives/targets . Sustainable cost recovery
at manageable horizons . Clear allocation of
tasks / duties / responsabilities . Thorough
risk allocation . Reciprocal enforceable
commitments of parties . Multistakeholders
engagement
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PRACTICAL IMPLICATIONS (1)
. Build contracts with adjustment mechanisms to
baseline data and with periodic reviews .
Control financing needs up-front - Avoid
up-front concession fees - Capex programs to be
profiled according to cash-flow streams -
Adjust to local market/local currency
conditions . Differentiate roles -
Operator - Investor
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PRACTICAL IMPLICATIONS (2)
. Control investors exposure - Projects
bankable through project finance - Equity
protection on political risk . Deploy and
apply risk mitigation instruments available or to
be made available by IFIs, ECAs and
Bilaterals . Mix public funding with private
funding - Revolving funds - OBAs - Grants
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PRACTICAL IMPLICATIONS (3)
. Enable performance reporting to project owner
and stakeholders . Enable appropriate dispute
prevention and dispute resolution mechanisms .
Instrument enforceability of both parties
obligations and balanced termination clauses
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THANK YOU / MUCHAS GRACIAS