Tratamiento de Agua de Puebla SA

cancelled

In December 1999, the Mexican state of Puebla, through its public water utility Sistema Operador de los Servicios de Agua Potable y Alcantarillado (SOAPAP), awarded a 20 year build, own and transfer contract for four water treatment plants to private operator Tratamiento de Agua de Puebla, SA de CV (TAPSA). The contract specified that TAPASA was to build the plants and then sell potable water to SOAPAP for re-sale to households. TAPSA was a special purpose company owned by French-Belgian operator SUEZ and Tribasa, a major Mexican construction company. In 2002 SUEZ owned 93.7 percent of TAPSA. The plants were expected to cost some $60 million. Financing was achieved with support from the Mexican Infrastructure Investment Fund (FINFRA), which including a contingent credit line backed by an intercept on federal transfers to guarantee timely payments from SOAPAP to TAPSA. Additional project financing was received from Darby Overseas Investment Ltd in the form of a $10 million loan to TAPSA. SOAPAP intended to finance the payments to TAPSA from user tariff increases. However, after a change of State administration, SOAPAP no longer considered the tariff increase a viable option. As a result, the monthly payments to TAPSA severely affected SOAPAP’s financial standing, and it eventually stopped making payments. The State Government began to make the monthly payments in 2002. In 2004, after more than 2 years of paying the water fees, the State Government realized it could significantly lower its monthly payments by substituting the T1 (off-balance) liability with an equity component with straight (on-balance) debt. In January 2005 SOAPAP refinanced the T1 with an anticipated buyback of the plants, for an amount equal to MxP665 million, part of which was used to prepay TAPSA’s long-term loans. Source: Mexico, Infrastructure Public Expenditure Review, March 30, 2005. None