Cancun Wastewater Systems

Active

Prospective

On October 19th 1993, the State Congress of Quintana Roo, Mexico, awarded a 30 year concession for the water and sewage systems in the municipalities of Benito Juarez and Isla Mujeres to private operator Aguakan. The largest city in the concession area was Cancun, the seat of the Benito Juarez municipality. Cancun had a population of 430,000 and received 3.5 million tourists each year. The concession’s goals were to reduce unaccounted for water to 30 percent by the end of 1996, and to increase water coverage from 63 percent to 95 percent by the end of 1996 and sewerage coverage from 35 percent to 95 percent by the end of 1998. Prior to 1994 water and sewage services in the two municipalities had been provided by Comision de Agua Potable y Alcantarillado (CAPA), a decentralized public agency of the state government. Aguakan was a special purpose company created by Mexican firm Desarrollos Hidráulicos de Cancun (DHC), in turn a subsidiary of national construction company Grupo Mexicano de Desarrollo (GMD). The concessionaire agreed to pay the state government concession fees the amount of 15 million new pesos ($4.37 million) as a down payment, plus 3.5 million new pesos ($1.02 million) the first year and 7.5 million new pesos ($2.18 million) every subsequent year starting from the second until the end of the concession. The concession became operational on January 1st, 1994. Aguakan committed to invest 400 million new pesos ($114.73 million) in the first five years of the concession. By 1999 only one fifth of this planned investment had been implemented: $10 million from cash flows and $12 million invested by the concessionaire during the first year of the concession, part of which was funded by DHC. After the 1995 the Mexican Peso devaluation the private operator stopped funding investments. A majority of the concession's revenues were derived from the sale of potable water to tourist hotels and other commercial users. Tariffs were approved by CAPA, the main regulatory body, and updated "according to the municipality’s buying power". In 1999, Azurix Corp acquired a 49% stake in the Cancun project and acquired operational control of the concession, while management control remained shared with the other partners. Azurix also committed $25 million in financing related to improvements in wastewater treatment system. In 2002 French multinational SUEZ, in a 50:50 partnership with Mexian group Penoles (BAL Group), assumed Azurix's share in the project. The transfer of ownership was for Azurix's share in Cancun Wastewater Systems and four other projects in Mexico. The partnership acquired the shares for $93 million. None $35 million invested in govt. assets contains the future yearly conession fees, discounted at 6% per year. # connections estimated by dividing population by 4.

Water and sewerage

Mexico

High

World Bank Group

Project

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