Tetouan Water and Electricity Concession

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In December of 2001, Vivendi Environnement (known as Veolia Environnement as of May 2003) led an international consortium in securing a 25-year concession contract from the local government of Tetouan. According to the terms of the award, the partnership named Société des Eaux et d’Electricité du Nord (SEEN) was to be responsible for operating and upgrading water, electricity distribution and liquid wastewater services in the northern city of Tangiers. The consortium was concurrently awarded a similar contract for the neighboring city of Tangiers. The total area covering both Tangiers and Tetouan included 23 districts with a total population of 1.2 million. As of 2002, the operator served approximately 111,000 water connections in the two cities. SEEN was owned by Veolia Environnement of France via Amendis, its subsidiary for the project (51%), Hydro-Quebec of Canada (18%), Morocco’s largest private firm Omnium Nord Africain (ONA) (16%) and state-owned SOMED of Morocco (15%). By contract, Moroccan ownership could not drop below 31%. The consortium was to improve services by developing infrastructure in order to keep pace with demographic growth. This was to comprise reducing leaks and energy losses, strengthening the quality and efficiency of the services, collecting and draining storm water, modernizing operating methods and monitoring water quality. The venture was to build 20 reservoirs in the Tetouan area, with a total capacity of 40,000 cubic metres, as well as 10 pumping stations and 700 kilometres of pipes. Three types of water use were defined with differentiated tariffs: domestic, preferential, and industrial. Different tariff structures applied to each water use category. For domestic use, there were four blocks, with a subsidized tariff for the first consumption block (less than 8 m3 a month). For preferential and industrial use, a two-part tariff was in place, with a fixed rate and a variable rate. The government was to benefit from excess operator returns as the concessionaire was to return 50% of any amount above an agreed to threshold to the contracting authority. A comité de suivi was to monitor the performance of the operator, enforcing both the Tétouan and Tangiers arrangements. The president of the Urban Community was to chair the committee. The Ministry of Finance was to carry out financial supervision and a National Audit Office was to audit the accounts. In the event of operator noncompliance, the operator was to incur a penalty immediately payable to the government authority. The contract included detailed penalties for various types of non-compliance. The two concessions, which were expected to last for 25 years, called for a total investment of 7.6 billion DHM (approx. US$690 million), comprising 3.9 billion DHM (approx. US$354 million) for Tetouan and 3.7 billion DHM (approx. US$335 million) for Tangiers. The largest share, a total of DHM 3.27 billion (43%), was to be devoted to sewage in the two cities, while DHM 2.49 billion (33%) was to be devoted to power, and DHM 1.86 billion (24%) to drinking water. Operational start-up began in July 2001. None None