Банкеръ Weekly

Briefs

FAILED WATER CONCESSIONS WILL ONLY BRING PROFIT TO CONSULTANTS

Arguments about the potential concession procedures for the water supply and sewage companies in Varna and Shoumen are about to continue. The future exploitation of water supply infrastructure will bring profit to one company for sure - the Dutch consultant Arkadis. It was paid USD1.2MN for its consultations on the procedure and the preparation of the tender dossiers for the two companies. This amount, which is part of the so called water loan launched by the World Bank, was remitted to the Dutch company accounts by July 2002. According to well-informed sources, the draft concession agreement stipulates that the company that wins the competition will have to compensate the USD1.2MN paid to the consultant. Five companies have shown interest in the two water supply networks so far: the British International Water Company and Thames Water, the French Generale des Eaux and Ondeo, and the Dutch Kaskal in consortium with the Bulgarian Glavbulgarstroy.The problem is who will be responsible for paying off the money to the World Bank, if the water companies in Varna and Shoumen are not given on concession. This outcome seems very likely as times goes by: a week ago the Varna municipal counsellors canceled their decision, dated December 21, 2000, for letting out on lease the Varna water supply company. We do not oppose this kind of procedure, but we think that the basic legal framework is still missing, and that an independent regulatory body should be established in order to control the branch price-making process, said Krassimir Marinov, municipal counsellor and water supply expert. People living in Varna have two major concerns. Firstly, there will be no way to regulate the prices of services offered by the concessioner. And the manager of the Varna water company, Valentin Vulkanov, says his company may reduce the price of water by BGN0.05-0.10 by the end of 2003. The other concern of the local population is the fact that investments planned to be made in the water supply infrastructure - USD64MN, are too small if distributed over a 25-year period. The Shoumen municipal counsellors hold the same view, too. According to the concession procedure worked out by the consultants, USD44MN will be invested within 25 years. The draft agreement does not stipulate how this money will be invested and in what terms, explained Krassimir Marinov. He said he hoped the concessioning of the Sofia water infrastructure would not repeat in Varna.If the two local parliaments decide to wait until the water legislation is adopted and an independent water regulator is created, the whole procedure will be delayed. There are few chances for the draft law to be adopted in the near future. Moreover, a number of MPs, including a few ones from the ruling majority, insist that the text be sent back for improvement. They also propose changes to many of the texts, particularly those concerning the future concession of the water supply infrastructure. According to experts in the branch, the concession procedure in Varna and Shoumen may even be terminated. Then, the money paid for consultations to Arkadis may not be paid off. And it won't even be clear who should pay it. According to representatives of the local parliaments, the amount should be compensated from the state budget. People in Varna do not agree with paying to consultants from the money planned for investment, says Krassimir Marinov.

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