Yarmouk Water Company Management Contract

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The Water Authority of Jordan (WAJ) of the Hashemite Kingdom of Jordan, through its Northern Governorates Water Administration (NGWA) department, signed a 5-year management contract with Veolia Aqua Jordan to manage and improve water and wastewater services of Yarmouk Water Company (YWC) in June 30, 2011. The company had 250,000 connections in the governorates of Ajloun, Irbid, Jerash and Mafraq which had a total population of 1.5 million people. Veolia Aqua Jordan was a joint venture between Veolia Water and Aquatreat. The project was awarded via a competitive tender that was announced in August 2010. Northern Governorates Water Administration (NGWA) underwent a process of commercialization. This included two stages. First, NGWA (a former department of WAJ) was corporatized through the establishment of a limited liability company (YWC). Secondly, a Management Contract was awarded to an experienced international utility operator to improve water and wastewater services for the population in the Northern Governorates. The international water services operator is expected to mitigate problems including intermittent supply, high operating costs and billing inefficiencies. The 5-year management contract included an automatic option to extend twice for two years upto a maximum of nine years. The management contract was to be financed through a combination of funds from WAJ and German development bank KfW. The agreement was a performance-based contract that entailed improving management, maintenance and operation of the Yarmouk Water Company. Veolia Water MENA was also responsible for directing infrastructure investments in the four governorates of Ajloun, Irbid, Jerash and Mafraq and ensuring sound management of water resources. For its services, the management contractor (MC) was to receive a (Fix Fee) plus incentive compensation (Variable Fee). Whereas the Fixed Fee was to decrease year by year, the Variable Fee would increase. During the Contract term, the Fix Fee was expected to be reduced year by year from 90% to 50 % from the MC’s total annual fee, and the variable fee was expected to increase from 10% to 50%.