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History of Aguas Argentinas History of Aguas Argentinas 1993 - 20051993 - 2005
Composition of the shareholders in Composition of the shareholders in Aguas Argentinas Aguas Argentinas
SUEZ39,93%
Anglian Water Limited4,25%
Corporación Financiera
Internacional (CFI)0%
Vivendi Universal7,55%
Banco de Galicia y Buenos Aires
8,26%
Programa de Propiedad
Participada (PPP)0%
Sociedad General Aguas de Barcelona
25,01%
The Aguas Argentinas concessionThe Aguas Argentinas concession
RADIUS SERVED WITH DRINKING WATER
RADIUS SERVED WITH SEWERAGE SYSTEM
RADIUS SERVED WITH DRINKING WATER AND SEWERAGE SYSTEM
AREA TO SERVE BY 2023
RURAL AREA OR WITHOUT DEFINED DIVISION OF LAND
SANFERNANDO
SAN ISIDROVICENTE
LOPEZ
SAN MARTIN
CITY OF BUENOS AIRES
3 FEBRUARY
MORONLA MATANZA
E. ECHEVERRIA
LOMAS DE ZAMORA
LANUS
ALTE. BROWN
AVELLANEDA QUILMES
EZEIZA
TIGRE
HURLINGHAM
ITUZAINGO
Note: Radius served with drinking water and sewerage system. April 2005
Concession area1,830km2
Serviced area1,070km2
May 1993 saw the State grant a 30-year licence to Aguas Argentinas to manage drinking water and sewerage services for the city of Buenos Aires and 17 sections of the greater Buenos Aires area. 10
million people are housed in this area.
The model concessionThe model concession
Long-term collaboration
STATE
• Sets the objectives
• Establishes the resources
• Controls and regulates
PRIVATE OPERATOR
• Manages the service efficiently
• Maintains and expands the infrastructure (which remains the property of the State at all times)
Flexible systemProvides for 5-year review, with attention to developments in the environment
Aims and objectives contract(Investments not completed may only be considered as non-fulfillment
inasmuch as they do not allow the company to meet the objectives stated in the Service Improvements and Expansion Plan)
The concession's achievementsThe concession's achievements
AchievementsAchievements
in excess of US$200 million per year,a level previously unheard of in the history of the ex OSN
DRINKING WATER
2 MILLIONINHABITANTS COVERED
SEWERAGE SYSTEM
1 MILLIONINHABITANTS COVERED
6,000KM OF NEW NETWORKS
2,000KM OF REHABILITATED NETWORK
Investments totalling US$1,700 million between 1993 to 2001
Huge transformationHuge transformation
10 YEARS AGO
1 MAY 1993
10 YEARS LATER
Huge transformation: Change statisticsHuge transformation: Change statistics
Coverage
83%
54%62%
Drinking waterSewerage system
Percent of inhabitants (%)
65%
OSN (1993) Aguas Argentinas (2001)
Population served
5.535
7.767
4.557
5.821
in thousands of inhabitants
Drinking waterSewerage system
OSN (1993) Aguas Argentinas (2001)
Network length
OSN (1993) Aguas Argentinas (2001)
11.910
15.817
7.200
9.294
Network length - in km
Drinking waterSewerage system
Water quality
50%
2%
8%
0%
TurbidityBacteriology
Percentages not meeting standard (%)
May 1994 Aguas Argentinas (2001)Aguas Argentinas (2001)
3.714
4.090
OSN (1993) Aguas Argentinas (2001)
Volume in thousands of m3 per day
Water production
Losses in the network
47%
34%
OSN (1993)
Percentages (%)
Most important works Most important works
CONSTRUCTION OF THE SAAVEDRA - MORON SUBTERRANEAN RIVER
These primary infrastructures are capable of supporting a significant portion of the expansion projects planned for the future.
EXTENSION OF THE SOUTH-WEST WASTEWATER TREATMENT PLANT
CONSTRUCTION OF THE NORTH WASTEWATER TREATMENT
PLANT
EXTENSION OF THE BELGRANO DRINKING WATER
FACILITY
Reduce network lossesReduce network losses
0
10
20
30
40
50
1993 2003
44% 32%
- 25%Losses*
Reducing network losses has resulted in savings of 1,000,000m3 of drinking water per day. This is equivalent to the production of drinking
water for the cities of Cordoba and Rosario combined.
* In 2003, the company exceeded the goals set forth in the Concession Contract.
AVERAGE PRESSURE HEIGHT 9.3 WCM
AGUAS ARGENTINAS (2002)(in WCM - water column meters)
Lack of water and pressure are a thing of the Lack of water and pressure are a thing of the past, except in very rare casespast, except in very rare cases
OSN (1992)
(in WCM - water column meters)
AVERAGE PRESSURE HEIGHT 5.5 WCM
Less than or equal to 6 WCM
Between 6 - 9 wcm
Greater than 9 wcm
Aguas Argentinas examines a wide range of physical, chemical, organoleptic, microbiological and bacteriological parameters, in
accordance with the World Health Organisation's recommendations.
The resulting water quality has substantially The resulting water quality has substantially improvedimproved
98%
50%
100%92%
0
20
40
60
80
100
1993 2002
Turbidity Bacteriology
Quality controlled by 500,000 tests
annually
Percent conformity
* Turbidity: this parameter exceeds the stipulations in the Concession Contract and Regulatory Framework
Human ResourcesHuman Resources
Training• 933,086 hours of training • Construction of a:
- Training Centre in the Drinking Water Treatment facility at Gral. San Martín
- Technical Training Centre at the Varela facility
Constructive relationship with the SGBATOS (The Trade Union of Sanitation Workers in the Greater Buenos Aires
Region)
Developing human resources has been one of the management pillars of Aguas Argentinas
Continued improvement in customer Continued improvement in customer satisfaction satisfaction
Consultant: GEA Market Research, sample from offices and Technical Services
40%
50%
60%
70%
80%
90%
100%
Offices 77% 84% 87% 89% 86% 76% 79% 87% 90% 95% 93% 94%
Work teams 67% 65% 69% 75% 72% 83% 88% 93% 91% 90% 89% 92%
1st 6mth 99
2nd 6mth 99
1st 6 mth 00
2nd 6mth 00
1st 6mth 01
2nd 6mth 01
1st 6mth 02
2nd 6mth 02
1st 6mth 03
2nd 6mth 03
1st 6mth 04
2nd 6mth 04
Aguas Argentinas has achieved a high level of satisfaction with its technical service and with its commercial contacts (more than 90% of customers give the company a score of 7 or
higher)
Pricing issuesPricing issues
Increase in prices to residential customers Increase in prices to residential customers since the start of the Concessionsince the start of the Concession
28.5% Due to additional investments 7.7% Due to variations in Infrastructure Charges (IC) and the Renovation of Connections Charges (RCC) 15.9% Due to increased costs
52.1% TOTAL
• The increase of 88% (vs. 52.1%) mentioned in a report issued by ETOSS to the UNIREN is not correct, because it counts charges already existing in the pricing base as increases (IC and RCC)
Out-of-step PricesOut-of-step Prices
The 15.9% review of the average residential price due to increased costs must be compared with the 73-% change in the CPI up to September 2004.
100
120
140
160
180
Aug
-92
Aug
-93
Aug
-94
Aug
-95
Aug
-96
Aug
-97
Aug
-98
Aug
-99
Aug
-00
Aug
-01
Aug
-02
Aug
-03
Aug
-04
Average residential price CPI
Note: August 1992: bid reference price
71% of residential customers pay less than 71% of residential customers pay less than $0.50 per day, incl. taxes $0.50 per day, incl. taxes (*)(*)
71%
Total Residential Customers (2,270,000 accounts)
Residential Customers with bills of less than $ 0.50 per day(1,610,000 accounts)
Note: (*)Taxes: VAT and Finance Charge to the Regulator
Relation between the average price per building and average family income per province
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
The impact of the Aguas Argentinas bill on the family The impact of the Aguas Argentinas bill on the family basket is one of the lowest in Argentinabasket is one of the lowest in Argentina
CONCESSION AVERAGE = 2.1
NATIONAL AVERAGE = 4.0
• The impact of the average price on the average family income for the main sanitation services in the country.
Note: (*) (*) EPH survey by locality in each province
(*)
(*)
(*)(*)
With its average price at 50% of the OSN price, With its average price at 50% of the OSN price, Aguas Argentinas has invested 4 times moreAguas Argentinas has invested 4 times more
Note: Changes in the price include the SUMA. The charge is taken as if it were a price increase and not a concept substitution (Infrastructure Charge and PSI differential costs)
Prices and Investments
0
20
40
60
80
100
120
1er b
im 8
0
5to
bim
80
3er b
im 8
1
1er b
im 8
2
5to
bim
82
3er b
im 8
3
1er b
im 8
4
5to
bim
84
3er b
im 8
5
1er b
im 8
6
5to
bim
86
3er b
im 8
7
1er b
im 8
8
5to
bim
88
3er b
im 8
9
1er b
im90
5to
bim
90
3to
. Bim
91
1er b
im 9
2
5to
. Bim
92
3to
. Bim
93
1er b
im 9
4
5to
. Bim
94
3er b
im 9
5
1er b
im 9
6
5to
. Bim
96
3to
. Bim
97
1er B
im 9
8
5to
. Bim
98
3to
. Bim
99
1er B
im 0
0
5to
. Bim
00
3to
. Bim
01
1er B
im 0
2
5to
. Bim
02
0
200
400
600
800
1000
1200
1400
Tarifa Real Promedio (1980 = 100) Inversión a Valores Constantes (2002 = 100)
OSM
AVERAGE PRICE
OSM AVERAGE
INVESTMENT
CONCESSION
START
AA
AVERAGE PRICE
AA AVERAGE
INVESTMENT
PRICE INDEX
Based on the CPI-adjusted average
nominal price (Consumer Price
Index)
INVESTMENT INDEX
Based on the WPI-adjusted average nominal amounts (Wholesale Price
Index)
Status of contract fulfilmentStatus of contract fulfilment
Status of contract fulfilmentStatus of contract fulfilment
Year 8 (2001)Population target
ORIGINAL
Population target
REVISED*
Drinking water 88% 79%Sewerage system 74% 65%
Population target
REACHED
78%
61%
Despite the difficulties, there is a limited difference between
the goals committed to and those achieved
Comparison: goals committed to and those achieved
Source: PMES (Plan for the expansion and Improvement of Service) approved by ETOSS (Water Regulatory body)
*The original goals were revised based on problems which arose during the first 5-year plan (see next slide)
Contract Difficulties during the 1st 5-year Contract Difficulties during the 1st 5-year PlanPlan
Contract difficulties
• Billing base 15% < than forecast
• Suspension of the Infrastructure charge (1995)
• Suspension of the Universal Service Charge (1998)
• Non-application of the pricing regulation (Art. 47MR)
First 5-year plan
• 87% of the original Water goal• 61 % of the original Sewerage
goal• Increase in debt
EARNINGS DEFICIT$493m
INVESTMENT DEFICIT$338m
Contract difficulties during the 2nd 5-Contract difficulties during the 2nd 5-year Plan year Plan
1999 - 2000 Investments of $395m FULFILMENT 100%
2001 Investments of $136m FULFILMENT 72%
THE FINANCIAL CRISIS PREVENTS THE RENEWAL OF THE FINANCING LINE FROM JUNE 2001
2002 - 2003 EMERGENCY
Price freeze vs doubling of investment costs Priority given to maintenance investment $140m Expansion (trust and own funds) $81m
Political, economic and social crisis Political, economic and social crisis December 2001December 2001
•From the start of the crisis, Aguas Argentinas From the start of the crisis, Aguas Argentinas managed to achieve three basic objectivesmanaged to achieve three basic objectives
• Maintain quality of service
• Reach the most vulnerable sectorsSocial Pricing
– The first company to implement a programme of social pricing: 85,226 residential customers benefited and 708 non-profit organisations
Programmes in low-income neighbourhoods– Participative Management model: programme based on a model of collaboration and integration of:
the community, local authorities, the company and the regulator to find solutions to the problems of access to services. 150,000 inhabitants benefited / 93 works projects were finalised / 68 information and educational workshops were held
– Water and Work plan: with the help of the government, this programme was rolled out with the aim of expanding the provision of drinking water services in the La Matanza area.100,000 inhabitants benefited / 82 works projects finalised or in process / 77 work cooperatives with 1,200 members trained
• Protect the sources of work
Contract renegotiationContract renegotiation
Renegotiation ChronologyRenegotiation Chronology
07/ 01/2002 "Public Emergency" lawFreezing of prices and non-application of the contract clauses relating to indexation in the event of devaluation.
14/02/2002 Creation of the Contract Renegotiation Committeeunder the auspices of the Department of Finance
18/03/2002 Formal opening of the renegotiationThe Committee started by requesting information on the Concession's financial position and its short-term prospects
08/11/2002 End of the information-collection stageThe discussions start
10/04/2003 Negotiations break downHaving failed to reach an agreement on the proposals tabled by both parties.
Renegotiation ChronologyRenegotiation Chronology
27/04/2003 Presidential elections04/07/2003 Creation of “UNIREN” (Unit for the Renegotiation and Analysis of
Public Service Contracts)Under the auspices of the Department of Finance and the Federal Planning Department, its mission is to complete the renegotiation of public service contracts and to analyse the fulfilment of the obligations under previous contracts.
07/2003 Formation of a trust fundThe Regulator required Aguas Argentinas to form a trust fund, under threat of executing the contract guarantee.
22/10/2003 Extension of the renegotiation termThe deadline for renegotiating public service contracts was extended to 31 December 2004.
01/2004 Unilateral extension of the Trust by the Government
Renegotiation ChronologyRenegotiation Chronology
11/05/2004 Signature of the Protocol of AgreementAgreement establishing an investment schedule totalling $242 million, to guarantee the continuity of service quality and the expansion of supply. The agreement also established the bases for re-defining the contract during 2004.
06/2004 Request for information from UNIREN
05/08/2004 Response from Aguas Argentinas to this request for information
12/10/2004 Aguas Argentinas presents its proposal
31/12/2004 The Protocol of Agreement comes to termAguas Argentinas fulfilled its obligations under the terms of the Protocol of Agreement. The company received no response from the Government on its proposal.
Renegotiation ChronologyRenegotiation Chronology
2005
01/2005 Unilateral extension of the Trust
Kirchner-Chirac meeting in Paris
Document drawn up with the points of agreement
From 01/2005
to 06/2005 Exchange of proposals without achieving a consensus
07/07/2005 Aguas Argentinas' definitive and final proposal
Reaching an agreement is urgent as the company's operating and financial situation does not allow it to continue to satisfactorily ensure its customers continuity and quality of service
26/07/2005 Aguas Argentinas sends a formal request to the Government to take the necessary measures within 30 days to re-establish the equilibrium that existed under the contract
Renegotiation ChronologyRenegotiation Chronology
9/09/2005 SUEZ has decided to recommend that the next Aguas Argentina's Board of Directors meeting, planned for September 19, 2005, puts in place the withdrawal process from the contract
19/09/05 Taking note of the negotiations failure, the Board is forced to propose to the next general assembly, on the 22nd of September, to initiate the withdrawal process.
22/09/2005 The General Assembly ratified the Board’s proposal to initiate the contract’s withdrawal process and asked the Board to examine with Argentinean authorities the practical modalities to put in place an orderly transition, in order to preserve the continuity of the service as well as employees’ interests.
Concession's current economic positionConcession's current economic position
OPERATING MARGIN
150
INVESTMENTS500
AMORTISATION OF REGULATED
ASSETS300
ANNUALDEFICIT
650
RESOURCESM$ PER YEAR
REQUIREMENTSM$ PER YEAR
(AT CURRENT EARNING LEVELS)
• Average annual values in $ (2005-2023)• 2004 billing in the region of $650m
The Concession is currently
losing $300,000 per
day