Lyonnaise des Eaux de Casablanca

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In April 15, 1997, Suez Lyonnaise des Eaux de Casablanca (Lydec), was awarded a 30-year concession contract to operate and rehabilitate the power generation and power/water distribution systems in Casablanca by the local government arm, Casablanca Urban Community (CUC). Casablanca was an area with a population of 3.5 million, about 25% of the Moroccan market. The system had 440,000 water/sewerage connections and 510,000 electricity connections and delivered 122 million cubic meters of water per year in 1997 (or 339,000 cubic meters per day). Lydec was a consortium consisting of Suez Lyonnaise des Eaux (renamed SUEZ in 2001) water subsidiary Ondeo (35%), Elyo, Lyonnaise's electricity subsidiary (24%), Electricite de France (18%), Endesa of Spain (18%) and Aguas de Barcelona (5%). Lyonnaise des Eaux had been present in Morocco since 1912. In 1949, the company signed a 50-year Build-Operate-Transfer contract for a wastewater treatment plant in Casablanca that expired in 1999. The main objectives of the contract were to: Increase the individual connections rate; increase customer service levels; invest heavily in the network; find a quick solution for Casablanca’s sewage and drainage problems; and implement a specific program for low-income neighborhoods. The first stage of work centered on the provision of electricity to Casablanca’s shantytowns. This was based on a system of extending the main electricity grid via temporary connections on a street-by-street basis to serve each house in the street. The consortium formally took over the power and water systems on July 31, 1997. Under the terms of the contract, alterations in water and power rates were only permitted at set intervals. Water rates rose in 1999 and did so again in 2002. Lyonnaise was committed to share profits if returns were higher than expected. It called for any profit above a 10% margin to be shared with the city of Casablanca at a rate of 35%. The investment program included construction of three new wastewater treatment plants. Total project cost was estimated around US$3.048 billion (30 billion dirhams). Investment in this project was divided through the following: (i) potable water systems, US$528 million; (ii) electricity generation and distribution systems, US$951 million and (iii) the largest part, US$1.691 billion, was to go towards the wastewater segment. Operations and management fees were estimated at US$2.9 million (FF18 million). Of this investment plan, MD 800m (US$84.4 million) was to come from the capital of the newly formed project company; MD 8,200m (US$865 million) was to come from bank loans and cash flow income - which was to include consumer charges; while the remaining MD 21,000m (US$2.215 billion) was to come from utility charges paid by new consumers into an investment fund. In December of 2004, the shareholding structure of Lydec changed, with Morocco's top insurance firm RMA-Wataniya purchasing 21% and the country's top pension fund Caisse de Dépôt et de Gestion (CDG) buying 20%, with SUEZ continuing to hold 59% (via Ondeo and Elyo). In July 2005, Lydec offered 14% of its capital in an IPO, as 1.2 million shares were 20% oversubscribed and were priced at MD 240 (US$26), raising MD 288 million (US$31.6 million). It was the first offering by a utility firm on the Casablanca bourse and nearly 80% of subscribers came from Casablanca. Money raised by the IPO went to Lydec's top two shareholders. Suez sold an 8% stake of the 59% it held before the subscription started and RMA-Al Wataniya sold a 6% stake and was left with 15% of Lydec's capital. After initial financial losses of US$11.6 million over the first two and a half years of the concession, Lydec saw a profit of US$10.7 million for the financial year 2000-01 and US$24.2 million in 2004. By 2002, connections had increased by 34% and water losses had decreased by 28%. Leak-reduction technology had resulted in annual water savings of 25 million m3 in five years - equivalent to the annual consumption of 800,000 inhabitants. The introduction of block tariffs and low-income customer connection targets saw 65,000 low-income households gaining first time connections by 2004. The company’s accounts also indicated that its services to 90% of customers were rated as satisfactory. None None