Societe d'Energie et d'Eau du Gabon (SEEG)

distressed

In July of 1997, a consortium led by Compagnie Generale des Eaux (CGE), a subsidiary of Vivendi (known as Veolia Environnement as of May 2003), signed a 20-year concession contract for the administration, maintenance, and operation of Societe d'Energie et d'Eau du Gabon (SEEG). The concession contract involved the administration of power generation, transmission, and distribution services as well as water supply services for the then 1.5 million inhabitants of Gabon. SEEG had approximately 84,000 customers for electricity and 43,000 for water. Consumption was principally concentrated in the regions of Libreville, Port-Gentil and Franceville. A service contract had been previously awarded in 1993 to a consortium consisting of Electricite de France, Hydro-Quebec and Lyonnaise des Eaux-Dumez which ended in 1995 with less than satisfactory results. As a result, prior to the concession award, the company was a fairly lean and well-run organization despite continued financial losses. The winning offer of 82.75% of the existing tariff was the lowest bid submitted for the concession in a competitive bid between three different finalists. Compagnie Générale des Eaux (France) with Electricity Supply Board International (ESBI of Ireland) won that bid and took a 51% stake for an estimated FCFA 7.6bn (US$14 million), while the government retained a 49% stake. Later in 1997, the government announced the planned divestiture of its 49% share of SEEG through a public offer of 24%, the sale of 20% to Gabonese institutions and of 5% to employees. However, the State retained a single “Golden Share” which entitled it to have two representatives on the Board of SEEG with a consultative voice (in particular, the State could oppose proposed investment plans). The 49% stake was offered to the public between October 31 and December 31. The shares of SEEG were traded through a system set up by Gabon's biggest bank, International Bank of Commerce and Industry of Gabon (BICIG). The offering of 735,000 shares at 10,000 CFA francs (US$16.40) each had been oversubscribed by 50%. SEEG was required to almost double the number of water connections during the concession. The contract included regional coverage targets defined by the percentage of the population with access to the network as well as a list of new centres to be served (30 for water and 21 for electricity). Another condition of the concession contract was a 17.5% cut in water and electricity tariffs, which had come into effect soon following the contract. No dedicated regulatory body was set up but a government ministry ran the contract in a very similar manner. SEEG's expansion program called for a committed investment of FCFA 200bn (about US$268 million) over the life of the project, most of which was to be self-financed. In addition, given the size of the investment needs, the government had chosen to help finance major network investments. The project company announced in February 2002 that after investing over FCFA 80bn (US$108 million) since 1997 it had been able to increase electricity connections from 100,000 to 125,000 and water connections from 58,000 to 77,000, while improving service quality. In 2003 SEEG was to invest a further Euro 14.6m (US$15.3 million) in the water processing unit near Libreville to expand its capacity and guarantee water supply to the capital in the medium term. By 2005 the company had invested FCFA 115 billion with no retrenchment. By 2002, the private operator had consistently improved service quality and reduced tariffs substantially. It had met or exceeded its targets for 2000 (and in some cases those for 2015) in all regions except the centers that were previously unserved such as rural areas. It had posted good profits since the start of its operations and paid its shareholders higher dividends every year (dividends rose from a contractually guaranteed 6.5% of the share price in the first year of operations to 20% in 2000). In January 2011 There is conflicting information on investments. According to an IFC note on the project in 1997, http://www1.ifc.org/ar1997/AR97/html/3-6.html, "The draft maintenance and expansion program calls for aggregate investments of about $600 million over the 20-year period of the concession." Other reports from around the time of signing put the figure around there as well. But according to a large project assesment report by WB/PPIAF in 2002, http://rru.worldbank.org/Documents/PapersLinks/1506.pdf, "....total investments promised by SEEG during the concession period (FCFA 200 billion or USD 268 million)." Since the latter is more of a formal and thourogh report, I used this figure.