Regie de Distribution d’Eau & d’Electricite de Rabat-Sale (Redal)

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In June 1998, the government of Morocco (via the Interior Ministry) awarded a 30 year concession for the rehabilitation, operation and management of water, sewerage, and electricity services in the Rabat region to the Portuguese-led Regie de distribution d’Eau & d’Electricite de Rabat-Sale (Redal) Consortium. The concession area covered Rabat, Sale, Temara and small urban and rural communities in the area which initially included 1.7 million people (a figure that was expected to double during the concession period) and about 200,000 customers. The consortium comprised: Electricite de Portugal (30%), Pleiade (a Portuguese civil engineering company) (30%), Urbaser (a subsidiary of Grupo Dragados) (30%), and Alborada of Morocco (10%). On October 23, 2002, Vivendi Environnement (VE) took over the 30-year concession contract, buying up the shares of the original consortium for a final purchase price of US$88.8 million. Vivendi then owned 51% of Redal with the balance owned by Compagnie Marocaine des Services à l’Environnement (CSME), the subsidiary company which managed Vivendi’s business activities in Morocco. Vivendi Environnement changed its name to Veolia Environnement in May 2003. The concessionaires planned to invest about 14 billion dirhams (US$1.37 billion) over the life of the contract. Of this investment total, six billion dirhams would be devoted to the clean-up of liquid waste, 3.8 billion dirhams to water and 4.2 billion for electricity. This was to involve the construction of new wastewater facilities, electricity cables, and water treatment plants. The contract included a commitment to link 20,000 houses to the power network and 15,000 to the water supply during the first five years of the agreement. Water and electricity tariffs were expected to be frozen for the first 12 months following the final agreement, after which they were to be revised if the rate of inflation exceeded 3%. In July 2004, Redal signed an agreement for a Eur 220 million ($268.2 million) loan to finance a four-year development program. Six local banks extended the 15-year paper, with Banque Marocaine pour le Commerce & l’Industrie (BMCI) and Banque Marocaine du Commerce Exterieure (BMCE) acting as mandated lead arrangers. The government was initially dissatisfied with the performance of the Portuguese-led consortium and the 2002 sale of Redal to Vivendi was the result. The government complained that the former shareholders were late in fulfilling their contractual obligations and had customer service issues. By mid 2004, however, wastewater plants and transmission systems had been upgraded, water connections were strengthened and extended, and water and electricity meters had been installed in every household. The company was still not profitable, but hoped to be by the end of 2006. None None