Aguas de Salta

Cancelled

Failure

In December 1996 the local government in la Salta, Argentina, carried out a public tender to divest 90% of its shares in water and sewage management company Aguas de Salta. The remaining 10% of the shares were to be distributed to the company’s employees. Following the divestiture Aguas de Salta was to be awarded a 30 year concession - with a 10 year extension option – for the water and sewage infrastructure in the province. Aguas de Salta was incorporated in 1995 as a state owned utility by transforming and merging the two state entities responsible for water and sewer provision in the province of Salta. The divestiture followed a public tender open to both local and international companies. A two stage “double envelope” auction was used. First, technical proposals were evaluated by a Privatization Committee made up of local government officials. The bids were ranked using a weighting-system to determine the Bid Quality Coefficient (BQC). The weighting-system was based on the following criteria: Bidder’s references, 10%; technical capacity, 20%; and Investment Plan 70%. The sum of all the points determined the BQC. After the committee determined the BQC for each bid, they opened the second envelope containing the financing specifics. Most importantly, the second envelope contained the volume of promised investments that would be financed through a tariff charge. The winning bid was the one with the highest value as a result of multiplying the BQC by the Investment volume specified in the second envelope. The Privatization Committee received four bids and two of those pre-qualified. In February 1998, it declared local construction company Necon S.A. as the winning bidder. Necon offered to invest a total of US$ 97 million in the first 15 years of the concession contract. On May 1998 the concession contract was signed between the province of Salta and Aguas de Salta (90% controlled by Necon). The remaining 10% of the shares are owned by the employees. In 1999 the company changed its name from Aguas de Salta to Sociedad Prestadora Aguas de Salta S.A. (SPASSA). In the second semester of 1999 Necon transferred 50% of it’s stake in SPASSA to Latin Aguas. SPASSA’s main contractual obligations were to expand, improve and guarantee water supply to all potential users according to the quality standards required in the concession contract; to expand, improve and guarantee wastewater collection to all potential users; and to collect, treat and discharge wastewater in compliance with the environmental regulations in place. Beginning in 2002, due to the economic crisis that had hit Argentina, SPASSA endured a lengthy renegotiation process that only ended in June 2004. The two and a half year renegotiation process finally came to an end with the following agreement: The five year investment plan corresponding to the 1999-2003 period was considered closed and the parties agreed to renounce any claims arising from works related to that period. The financing of the plan to install meters, previously financed directly by consumers, was to be shared 50%-50% by SPASSA and the provincial government. The Investment Plan to be carried out for the 2004-2008 period was to total US$31.8 million (ARG$ 97.9 million) and executed by SPASSA. 66% was to be financed by SPASSA through the tariff and 34% to be financed by the province of Salta. On May 22, 2009, the government of northwest Argentine province Salta rescinded the concession contract, creating a new state-owned water utility called Compañía Salteña de Agua y Saneamiento. On May 22, 2009, the government of northwest Argentine province Salta has rescinded the concession contract with a potable water and sanitation concessionaire, creating a new state-owned water utility called Compañía Salteña de Agua y Saneamiento 1999-2003 Actual Investments in Facilities based on POIT 1999-2003 in Argentine Pesos, converted to US Dollars. Since amounts were not for calendar years, investment amouts were averaged through so as to estimate calendar year amounts. 2004-2008 Commited Investment in Facilities based on Total Investment Plan 2004-2008 in Argentine Pesos, converted to US Dollars.

Water and sewerage

World Bank Group

Project

Water Supply and Storage, Commercial, Power Transmission, Government, Waste Processing and Treatment, Power Generation (CCGT)