Rio Bogota Wastewater Treatment Project

cancelled

In August 1994, the municipal district of Santafe de Bogota, Colombia, awarded a 30 year build, own and transfer greenfield contract for a water treatment plant to Bogotana de Aguas y Saneamiento ESP, SA (BAS). The contract was signed on September 20, 1994 and later clarified in four separate documents, Acta Aclaratoria No. 1, Acta Aclaratoria No. 2, Acta Aclaratoria No. 3 and the Consent and Agreement document. The plant, located on the Salitre River, was intended to process an average flow of 4 cubic meters/second of wastewater. The Salitre facility was the first phase of a comprehensive plan to build three wastewater plans to clean up pollution on the Bogota River. BAS was awarded a global concession for all phases of the project, but no financing arrangements had been made beyond phase one. BAS was a subsidiary of Lyonnaise des Eaux (51%) and its subsidiary, Degremont (49%). Suez Lyonnaise des Eaux changes its name to SUEZ in 2001. The plant was estimated to cost some $100 million. Financial closure for the project was reached in September 1997, through the issue of senior secured notes on the U.S. private placement market. The debt issue, handled by Chase Securities, involved two series of investment grade notes: a $30 million issue which received an A rating from Duff and Phelps Credit Rating Co. and a second $70 million issue, which received a BBB rating. The smaller issue was backed by a partial risk guarantee from the Inter American Development Bank. The notes had a 13 year maturity term. The plant was completed on schedule, on September 2000. BAS was to operate the plant for 27 years. Wastewater tariffs for the project were based on a guaranteed minimum sewage flow from the District of Santafe de Bogota, and adjusted for macroeconomic factors. This scheme eliminated volume fluctuation risk and reduced inflation and foreign exchange risks. In January 2004, the municipal authority decided to terminate the contract, after finding it cheaper to operate the plant itself. This termination was not due to default by BAS, and there were no disputes regarding its investment in the plant. According to the contract, the municipality was obliged to pay the project company US$74 million for the project assets. The Bogota water utility EAAB assumed operation of the project. None None