Ecapag

distressed

In April 2001 the Government of Ecuador, through Empresa Cantonal de Agua Potable y Alcantarillado de Guayaquil (ECAPAG), awarded a 30 year concession contract for the potable water, sewage and drainage systems in the Canton of Guayaquil to private operator International Water Services (Guayaquil) B.V. The contract covered an area with a total population of 2.5 million. The most important commitment made by the concessionaire was to increase water and sewage coverage rates from 60 percent to 95 percent of the population. The concession was awarded following a public tender organized with the assistance of the Inter-American Development Bank (IDB). The tender was announced in October 2000. Sole bidder International Water was declared the winner on December 22, 2000. International Water Services Guayaquil (Interagua Cia. Ltda) was a consortium made up of US-based engineering/construction company Bechtel (50 percent) and Italian power company Edison Spa (50 percent). International Water committed to a capital expenditure of about $500 million over the 30 years of the contract. The concession term was divided into six five-year periods. For the first five year period, expiring in 2006, the concessionaire was to create 55,238 new water and wastewater connections. It was estimated reaching this target would require some $146 million in capital investments. Financing was to be achieved through an IDB loan of $50 million, equity participation from the concessionaire and internally generated cash flows. In 2006, Interagua was approved a US$300mn investment plan for the 2006-2011 period. In December 2008, International Water Services, the controling consortium of Ecapag, sold 90% of its shares to the new consortium Proactiva Medio Ambiente SA with the following representation: Veolia 25.5%, FCC 25.5%, Hidalgo e Hidalgo 24.5%, and Fanalca 24.5%. The final shareholding was therefore: International Water Services comprised of Bechtel [USA, 5%], Edison Spa [Italy 5%], and the new shareholders: Veolia [France, 22.95%], FCC [Spain 22.95%], Hidalgo e Hidalgo [Ecuador, 22.05%] and Fanalca [Colombia, 22.05%]. Veolia and FCC formed the operator Proactiva. In October 2009, an audit conducted by Ecuador's housing ministry Miduvi recomended the renegotiation of water concession contracts held by Amagua and Interagua after alleging distortion in their rates as well as the lack of a social tariff. Miduvi also recommended the termination of Triple Oro's contract in Oro province. Under Ecuadorian law, if the contracts were not renegotiated within one year, they could all be terminated. The comptroller general was reviewing the report as of December 31, 2009.