Public-Private Synergies for Water Public Service...

1

Public-Private Synergies for Water Public

Service Management

The Experience of Triple A de Barranquilla

Javier MaliaTriple A de Barranquilla

WB´s Water WeekFeb 2004

Washington

2

Public-Private Synergies for water public

service management

1. An efficient company2. Group Structure3. Our market4. Triple A´s Public-Private Partnership

experience and threats1. The Institutional Enviroment2. The Internal framework of Triple A

5. Conclusion

Index

3

BarranquillaTriple A in figures

• Our market: Barranquilla, Colombia (including metropolitan area) • 1.970.000 inhabitants• 840 employees• Ratios:

• Water provision: 170 hm3/year• Water service rate: 0.4 US$/m3

• 99% Water service coverage• 94% Sewage coverage

4

A road to efficiency (1990 – 2003)

RATIOSEPM 1990

TRIPLE A* DEC 1993

TRIPLE A* DEC 1996

TRIPLE A* DEC 2003

WATER COVERAGE 60% 66% 78% 99%

SEWAGE COVERAGE 50% 54% 68% 96%

SOLID WASTE COLLECTION COVERAGE ND 67% 90% 100%

NON-INVOICED WATER 70% 67% 55% 38%

No. OF EMPLOYEES/1000 USERS 13,5 6,8 5,4 2,9

NUMBER OF USERS (BARRANQUILLA) 133.194 141.486 171.192 267.482

WATER PRODUCTION ND ND 17.209.218 14.814.569

5

Triple A´s efficiency target

• Depolitization and savings: Improves competition in contracts and supplies.

• Decentralization of authority: empoweredstaff

– Flexibility to changes– Increase effectiveness– Stimulate innovation and moral of

employees

• Quality management: 19 processes ISO 9001 v 2000 certified

– Customer orientation of processes– Yearly customer satisfaction survey

6

POWER CONSUMPTION VS. CUSTOMERS1996 – 2003

1996 1997 1998 1999 2000 2001 2002

PO

WE

R (

Mill

ion

KW

)

CU

STO

ME

RS

8

9

10

11

12

E M M J S N E M M J S N E M M J S N E M M J S N E M M J S N E M M J S N E M M J S N E M

180000

200000

220000

240000

260000

280000

300000

MILLION KW CONSUMED CUSTOMERS

2003

7

EXCELLENCE IN CUSTOMER RELATIONS1996 - 2003

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

E M M J S N E M M J S N E M M J S N E M M J S N E M M J S N E M M J S N E M M J S N E0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

Complaints Collection

8

Financial sector recognizesTriple A´s efficiency and

soundness

• AAA rating (Duff &Phelps, BRC) • 2003 Bonds issue US$ 60 million• IFC partial guarantee

9

Keys to Triple A´s success

• International operator’s know-how– Wide application of technology:

• Amérika software, GIS, automation, remote control

– Training and Specialization of local staff

• Effective management strategies– Triple A’s independence of management– Strong links with community – Solid communication policy

• Public partner’s commitment with the WSS problems

• Initial regulatory and policy strengths

10

Group Structure

11

The Triple A local operator model

Big InternationalOperator

Regional ColombianOperator

Small Local Operator

� Technology and know howtransfer

� Financial support� International Market synergies

� Technology and know howtransfer

� Financial support� International Market synergies

� Qualified staff� Local market efficiencies� Local experience� Operative support

CANAL DE ISABEL II(ES)

CANAL EXTENSIA S.A.(ES)

GIS(CO)

AAAECUADOR

(EC)

METROAGUA(CO)

AMAGUA(EC)

AAADOMINICANA

(RD)

AAAVENEZUELA

(RD)

TRIPLE A(CO)

INFORESA(RD)

INASSA I(CO)

TECVASA(ES)

tecvasaTÉCNICAS VALENCIANAS DEL AGUA, S.A.www.tecvasa.es

1996: Starting changes in Triple A: Association with the Qualified Partnersearching for added value in the company :

• technical and technology

• financial

• Independence

• commercial terms

12

CANAL DE ISABEL II: A public company with 154 years of successful experience

Public Company:

Titled by the Government of the Comunidad Autónoma of Madrid

Experience in management of the integrated water cycle:

14 reservoirs, 16 WTP, 164 WWTP, Over 10.000 km of

networks, Population served: 5.300.000 inhabitants in Spain.

Wide commercial experience

Provides service to 168 municipalities in Spain

845.000 customers

2.995.205 invoices issued a year

Income : 335,3 Million € in 2002

Grupo Canal:

Diversification in flourishing sectors:

Communications, energy (electricity and gas)

Environmental management, Contact Centers

Expansion to new operations in the water sector

Latin America, Central Europe, North Africa

13

Our market

14

Socioeconomic Stratum in Barranquilla and metropolitan area.(1.900.000 inhabitants)

305.573TOTAL

533SPECIAL & OTHERS

775OFFICIAL

911INDUSTRIAL

20.270COMERCIAL

11.132ESTRATUM 6

16.241ESTRATUM 5

23.378ESTRATUM 4

62.213ESTRATUM 3

86.601ESTRATUM 2

83.519ESTRATUM 1

Residential

# of usersType of users

15

Our low income users (76%)

16

Our high strata (5 & 6) users(9%)

17

The Triple A´s Public-Private Partnership

experience and threats

The institutional enviroment

18

Drivers of Triple A´s changes: Legal authority

• Private management: the same legal framework than private companies

– Staff hiring, Works and supplies contracting• Private governance structure:

– Private Control: Ensured by Company´s Charters even with public majority shareholding(depolitization of management)

– General manager appointed by the Board• Investment priorities: targets are

negotiated (P-P)

– The company has an strong social aim– Technical and financial criteria prevail

Board ofShareholders

Board of Directors

General Manager

Managers Committee

5Members:Public: 2Private:3

Functionalmanagers ofTriple A

35.1%

64.9%

(Public)District ofBarranquilla

(Private)

19

RESULTS FROM PUBLIC AND PRIVATE COMMITMENT:

The water and sewage investment for the southwestern area of barranquilla 1999 - 2003

• Cost of the project: US$ 45 Million• Objective of the project: Installation of:

• 310 km of water systems• 357 km of sewage pipes• Pumping station and WWT Pond

• Area: 2000 Hectares• Population served: 350.000 InhabitantsStratification:1 (76%), 2 (20%) y 3 (4%)

•Coverage:•Water: 99%•Sewage and treatment: 96%

20

Regulatory framework

• Strong regulator• Strengths:

– Investments attraction: established a solid basis and balancedworking conditions

– User’s defense: ample rights, and solid mechanisms for defense– Financial viability: established cost recovery of the companies

• Weaknesses:– Independence of the regulator: pressured entity.– tariff reviewing: too slow and unflexible process.– Regulatory unstability: is worrying utilities and potentially new

operators.– Financial viability: Most companies are not recovering all operational

costs.

21

Policy framework

• Water sector is prioritary for President Uribe’s Government

• WB´s support and advice to government is important in the sector´s main issues

• Income unstability: central and local Governments are harming the Utility’s Income Statement

– New taxes: Increasing fiscal pressure is harming the sector

– Subsidies provided by the State and local authorities to operation don´t cover the real deficit

• Legal uncertainty

• Political use of tariffs in political campaigns, creating lack of confidence and dissatisfaction from users to utilities

22

Accountability for results• Too many control entities: more than 20

– Regulation of service: CRAPSB– Inspection, control and vigilance: SuperServicios– Enviromental activities control and vigilance: BAMA, CRA– Management and decisions: 3 ‘Contralorías’– Users: ‘Veedurías’, ‘Personerías’– Financial and Securities: SuperValores– Societary: SuperSociedades– External Audit Company– Health: Health Ministry and 2 local health care entities– Fiscal Inspector: Management Control

• High cost for utilities– High staff effort is devoted to controllers– Duplicated (even tripled) controls– High monetary cost

• Control organisms often are politically used

23

The internal framework of Triple A

The Triple A´s Public-Private Patternship

experience and threats

24

Strong corporate culture

• Staff has been carefully selected and qualified

• Democratization of Triple A’s objectives– Strategic planning set democratically by 40 top staff members:

Mission, Vision, objectives and indicators definition

• Most managers have strong leadership skills

• Triple A’s staff has a strong sense of belonging– The ´Triple A family´ involves staff and their relatives

– Corporate target for worker´s family protection and development

– Staff feels proud of working for the company

25

Conclusion

26

Past, Present and future

• Triple A has made a good job: today,– We provide an excellent service– Our users are satisfied (and they pay their WSS

bill)– We have operational and financial stability

• Private + Public owned utilities are a balanced solution for WSS operation andinvestment

• But...

27

Past Present and future

• Triple A and all Colombian utilities are facingserious threats:– Regulatory unstability– Tax pressure– Legal framework changes– Political use of tariffs

• Utilities are subsidising the poorest´s WSS bills• As a consequence: The Colombian WSS sector

is not attractive for investors

28

...THANK YOU

Javier Maliajmalia@aaa.com.co

Triple A de Barranquilla