Tibitoc Water Treatment Plant

distressed

In 1998 the state owned Colombian utility Empresa de Acueducto y Alcantarillado de Bogota (EAAB) awarded a 20 year rehabiliate, operate and transfer contract for its Tibitoc water treatment plant to private group Sociedad Concesionaria Tibitoc. The Tibitoc plant was one of three facilities to supply water for the Colombian capital of Bogota, home to some 6 million people. The plant had been built in 1959 and last refurbished in 1977. Concesionaria Tibitoc committed to restore the Tibitoc plant to its nominal operating capacity of 10.5 cubic meters per second, which by 1998 had fallen to 4 cubic meters per second. The concessionaire was also responsible for rehabilitating a water pipe between Tibitoc and Casablanca to facilitate the delivery of water to Bogota. Sociedad Concesionaria Tibitoc was comprised of three parties: Generale des Eaux (known as Veolia Environnement as of 2003, 25 percent), Corporation Financiera del Valle (Cofivale) (50 percent), and Fanalca (25 percent).The latter two firms were Colombian finance companies. CGE was responsible for all technical aspects of the project, including engineering, construction, operations and maintenance. CGE was to perform the plant and pipeline rehabilitation work in the first three years of the concession contract. The Tibitoc plant normally processed water from the Bogota River but could also receive water from the Tuesaca River. The plant was a conventional treatment facility, consisting of pre-sedimentation, coagulation, flocculation, sedimentation, filtration and disinfection. Total cost of the project was estimated at $65 million, of which $30 million were for the plant rehabilitation and $35 million for improving the 31 km water pipelines towards Bogota. Financial closure was reached with the help of the InterAmerican Development Bank, who provided a loan of $9 million and arranged a B loan guarantee mechanism for a further $9 million through a consortium of commercial banks. Sociedad Concesionaria Tibitoc had a take-or-pay contract with municipal utility EAAB. The public utility evaluated the contract in 2006 and proposed to the concessionaire to cancel the contract in March 2007. The concessionaire, however, refused the ruling and appealed to El Centro de Arbitraje y Conciliacion de la Camara de Comercio de Bogota which would resolve the dispute in 2008. The municipal government of Bogota decided to cancel the contract because it concluded that the changes in macroeconomic conditions and water consumer patterns made the additional capacity provided by the project unnecessary. In addition, it estimated that continuing the contract until expiration date would cost almost 50% more than terminating the contract in 2007. Check in 2008 if the contract was upheld or canceled. None