WUMI Sept2011
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SEPTEMBER 2011 I water VOLUME 6 ISSUE 3 utility management INTER N ATIONAL COMMUNICATIONS PROJECTS Innovations in contracting for project delivery SECTOR REFORM The regulator’s view of Malaysian reform progress FINANCING PLUS ... Who owns the UK water industry? and From bankruptcy to AAA rating: Emerging bond activity in the US success in Bogota NEWS US looks towards improving infrastructure resiliency he US government is currently in the Congress, would involve the EPA establish - ‘AMWA has estimated that adapting to Tearly stages of considering a piece of ing a grant programme in which water and hydrological conditions brought about by legislation that would provide grants for a wastewater systems would compete for climate change may cost US water and range of actions to help utilities adapt to matching funds to plan or implement water wastewater systems nearly $1 trillion changing hydrological conditions. infrastructure projects made necessary by through 2050,’ noted AMWA executive A Californian Democrat, Lois Capps, has changing hydrological conditions. director Diane VanDe Hei. ‘This bill’s introduced the Water Infrastructure The legislation would support modifying modest authorisation of $50 million per Resiliency and Sustainability Act of 2011 or relocating existing water system infra - year will help utilities begin addressing with backing from the US Association of structure; projects to preserve or improve these needs today, while also creating Metropolitan Water Agencies (AMWA). water quality; investigating, designing or thousands of jobs.’ The bill would authorise a new constructing groundwater remediation, The Bill is currently at committee stage – Environmental Protection Agency (EPA) recycled water or desalination facilities; one of the first steps in the legislative programme offering competitive grant increasing watershed protection, for process – having been referred to the funding to help water systems adapt to instance by using ‘green infrastructure’; Subcommittee on Water and Power in early the impacts of changing hydrological development of renewable energy; and August. Introduced bills and resolutions conditions, including those caused by adopting and using advanced water treat - first go to committees that deliberate, climate change. ment or water demand management investigate, and revise them before they go The new legislation, which is based on techniques, among a long list of other water to general debate. The majority of bills and proposals originally introduced in the 111th efficiency and flood risk reduction actions. resolutions never make it past this stage. G UK water companies attract large-scale investment he acquisition of the UK’s Northumbrian Gardner says: ‘This [the sale of approximately £20 million ($32 million), TWater by Hong Kong-based Cheung Cambridge Water by CKI] presents a with £7 million ($11 million) in profits Kong Infrastructure Holdings (CKI) was unique opportunity for a UK pension fund before tax. coming to a close at the time of going to to acquire one of the UK’s most efficient ‘In sum, this is an ideal asset for a press, with CKI investing £2.4 billion water companies. Cambridge Water pro - pension scheme looking for secure, ($3.7 billion) in the utility. vides essential fresh water services to over long-dated inflation-linked cash flows, CKI previously owned another UK 300,000 people in Cambridgeshire. but with a significant real return above water utility, Cambridge Water, which ‘Its activities are regulated by Ofwat long-dated inflation-linked gilts. The it sold to banking group HSBC in and its prices may be increased in line attractiveness of Cambridge Water is order to ease progress of its bid for with the agreed price review, based on a that its small size of £74 million ($117 Northumbrian Water. formula related to the retail price index, million) makes it a palatable acquisition Pensions investment consultancy plus or minus a sum relating to its level of for one of the top 25 UK pension schemes Redington and investment bank Evolution efficiency,’ says Redington. ‘Cambridge by assets, as it will represent a capital Securities are reported to have joined up to Water is permitted to earn a secure inflation investment of less than 1%. It’s well run find a UK pension fund, or consortium of linked return on its regulatory capital value and has no external debt apart from its funds, to buy Cambridge Water. of £64.64 million ($102 million). At its revolving credit facility to cover working In a blog, Redington co-CEO Robert March 2011 year-end, revenue was capital.’ G See sector review, p27 Veolia Environnement announces results and restructuring rench environmental services company Europe and to a lesser extent in reported a positive free cashflow of FVeolia Environnement SA recently North Africa, by a total amount of €155 million ($212 million) against €133 announced its half-year results in tandem €97 million ($133 million).’ million ($182 million) in the first half of with an accelerated corporate restructuring Operating income was €252 million 2010 and a reduction in net financial debt that includes divestitures and a reduction in ($345 million) against €1 billion ($1.4 by €454 million ($623 million) to €14.8 the areas in which the French water and billion) the previous year, and negatively billion ($20 million). The company also wastewater giant works. impacted by €686 million ($940 million) of reported a ‘solid execution’ of its asset The company’s statement cites non-recurring write-downs, principally in divestment programme. ‘difficulties in southern Europe, Italy, Morocco and the US. The company’s accelerated restructuring North Africa and the United States’. Veolia announced total asset aims include exiting transport activities Its consolidated revenue grew 4.4% writedowns of €800 million ($1.2 billion) in Morocco, environmental services in to €16.3 billion ($22 billion) and its because of problems in its US, Italian and Egypt, Marine services in the US and adjusted operating cashflow grew 2.3% north African businesses. Adjusted net Southern Europe, and achieving an to €1.7 billion ($2.3 million). It notes income was €188 million ($258 million) increased geographic concentration of that this figure was ‘negatively impacted compared to €263 million ($360 million) company operations with a presence in by operational difficulties within the US in in the first half of 2010. fewer than 40 countries by 2013 compared the Marine Services business, in southern On a different note, the company to 77 currently. G 2 • WATER UTILITY MANAGEMENT INTERNATIONAL • SEPTEMBER 2011 NEWS CONTENTS Report focuses on large REGULARS 7 ANALYSIS Are green shoots appearing in the US water and number of unreported wastewater market? Whole system approach focus from new breaches of consultancy chief drinking water safety 43 PRODUCTS & SERVICES 44 READING & RESOURCES he US Government Accountability Office (GAO) has warned Tthat states are not meeting their obligation to report health- 44 DIARY related breaches in drinking water to the extent that US Environmental Protection Agency (EPA) audits uncovered 26% of health-related and 84% of monitoring violations went unreported. FEATURES The GAO noted in its report that 11 states had 20 outbreaks of 9 FINANCE illness associated with drinking water in 2005 and 2006, resulting Colombian utility in 612 illnesses and four deaths. The organisation warns that the success in report findings undermine the reliability of data collected under the finance Safe Drinking Water Act (SDWA). diversification: For the report, the GAO was asked to gauge the quality the case of Bogota of the state data EPA uses to determine compliance with By Vivian Castro- the health and monitoring requirements of the Act and the Wooldridge and status of enforcement efforts, the ways in which data quality Jose Garcia could affect EPA’s management of the drinking water Larrarte programme, and the actions EPA and the states have been taking to improve data quality. 16 FRANCHISING GAO analysed EPA audits of state data undertaken in Going with the franchising flow: improving watsan services in South Africa 2007, 2008 and 2009, and canvassed EPA and state officials to By Kevin Wall and Jay Bhagwan obtain their views on factors that have affected data quality and steps that could improve it. 21 PROJECTS / CONTRACTING The GAO report concludes: ‘The data states reported to Leading projects show EPA for measuring compliance with health and monitoring contracting requirements of SDWA did not reliably reflect the number of innovation health-based and monitoring violations that community water 27 SECTOR REVIEW systems have committed or the status of enforcement actions.’ Who owns the UK’s As well as the under-reporting of violations in general, water industry? according to EPA headquarters and regional officials GAO By Keith Hayward interviewed and surveyed, state-reported data also under- reported the percentage of water systems against which the 33 BENCHMARKING states have taken enforcement actions. Survey respondents Providing incentives for improved services: outlining benchmarking benefits for Cape Verde and other officials reported that various factors contribute to By Pedro Simões and Rui Marques errors in reported data on violations and enforcement, including inadequate training, staffing and guidance, and insufficient 37 SECTOR REFORMS funding to conduct those activities. Malaysia’s progress with its water sector reform: the The GAO makes a number of recommendations to improve the regulator’s view situation, including: