Buenos Aires: the first six years
In May 1993, Buenos Aires and the 17 suburban districts around the city signed a 30-year concession contract with Aguas Argentinas, whose main shareholder is Suez Lyonnaise des Eaux. The concessionaire was charged with modernising and running the existing water and wastewater systems and extending the networks to connect residents who previously could not receive water, all at a total cost of $4Bn. Six years later, Peter Allison reports on the progress Aguas Argentinas has made.
Buenos Aires is the concession against which others are benchmarked. Signed in 1993, the contract was one of the first between a European private operator and one of the world’s mega-cities. Metropolitan Buenos Aires spans 2800km2, with an urban area spread over 1200km2 and is home to over 12M people.
This has been made possible by the initial contribution of shareholders, a total reinvestment of profits over the first three years of the contract, and loans from international financial institutions. Multilateral banks have granted close to $600M in long term loans to the concession, guaranteed by the shareholders.
By the end of 1996 almost $800M had been invested while net billing was close to $1.2Bn. Net income stood at $400M and by the end of 1997 had risen to $433M. However, cashflow was not keeping up with investment ($149M against $250M in 1997) so Aguas Argentinas and the concession regulator, ETOSS (Ente Tripartito de Obras y Servicios Sanitarios) convened to review the billing policy.
The contract binds Aguas Argentinas to connect outlying Buenos Aires districts which do not already have access to running water to the public water supply. The original billing policy bound the newly connected, who are principally in low revenue districts, to pay connection charges. These turned out to be too excessive, resulting in revenue shortfalls.
At the end of 1997 Aguas Argentinas proposed a change in the billing policy to take account of these social divisions, a change which could soon be repeated on other international concessions like Manila. Connection charges have now been abolished and the development cost of the network divided among all water customers.
Jean Louis Chaussade, Director General of Aguas Argentinas, says his company has a social role to play. “We believe that everyone should pay, but that bills should be linked to income.” Net income went up to $460M in 1998, mainly the result of higher general billing, both in metered and non-metered systems.
A strong company
The structuring and development of an efficient concession company is crucial if technical and institutional challenges, as well as the economic and commercial ones, are to be met.
Aguas Argentinas is a private company with more than 4000 employees and a managerial staff that direct the operation of water and sewerage services for the city and its 17 districts. More than 90% of the employees were previously employed by the former utility, Obras Sanitarias de la Nacion (OSN).
The first six years of the contract have been dominated by infrastructure works and improvement of the customer files inherited from OSN. Significant achievements include:
- the production of almost 4.7Mm3/d of water from the San Martin and General Belgrano WTPs;
- construction of the Saavedra-Moron tunnel which will supply more than 1M inhabitants in the west of Buenos Aires with potable water when it is finished in April 2000;
- a new STP to treat municipal effluent from San Fernando, San Isidro and Tigre;
- a 40% capacity increase at the STP treating municipal effluent in the south west of Buenos Aires;
- 3200km of new water network;
- 1100km of rehabilitated water network;
- 1500km of new sewerage network; and
- a reduction from 43% to 36% of non-accounted for water, generated by leaks in the distribution network and by losses from faulty domestic installations.
The renegotiation of the contract will increase the availability of funds to finance infrastructure works to be undertaken in the period to 2003, shifting the burden from short term debt in the process.
By the end of 1999, another $200M will have been invested to guarantee further network coverage and provide those already connected with a high level of service. In the next five years, Aguas Argentinas expects to supply water to an additional 930,000 people and sewerage services to a further 950,000.
Water supply in poor neighbourhoods
In Buenos Aires prices are based on a flat rate in 80% of cases and on meters in the other 20%. Meters are read and bills sent out every two months. On average network users pay $10-15 every two months for potable water (twice this amount for water and sewage). The minimum price is $4/two months (for around 30% of the population).
Aguas Argentinas first started to encounter problems in the so-called ‘villas miserias’, disadvantaged areas made up of low income households. Nearly 3M people in Buenos Aires have monthly family incomes of less than $500, equivalent alone to the water connection charge, part of the original concession contract. These disadvantaged areas potentially account for 10% of Aguas Argentinas’ customers but 1% of income and 15% of investment.
In general, people who live in the villas miserias and are not supplied with water want a continuous, reliable service so they can improve their sanitary conditions. But they could not afford high prices and the prohibitive connection charge. So the concession contract had to be changed to reflect this.
The problem of supplying water required Aguas Argentinas to move from a centralised approach to a more conciliatory one between the concessionaire, public institutions and the disadvantaged areas. NGOs have been called upon to encourage dialogue between the various players who often have conflicting interests.
This has resulted in a number of radical solutions. One involves ‘bartering’ local labour in exchange for network connections. The other applies to larger scale projects where the bartering system is impossible. A contractor financed by the district or province carries out the network extension work under the supervision of Aguas Argentinas but employing local staff. The residents then reimburse the province over a five-year period at $4/month.
Specific measures have also been introduced to improve billing and payment collection. In small areas where contacts have been established between Aguas Argentinas and local community leaders, collective or block billing is used, with an intermediary responsible for payment.
In areas which are well organised but too large to be billed using the block system, bills may be made up for each group of 5-10 families. And in larger areas, individual billing is used, and the bills are distributed by a resident of the areas who is paid a percentage of the sums collected. In one neighbourhood with 35,000 residents, this method has led to a 20% increase in the collection rate (which increased from 20% to 40% in the most difficult area of the city).
Buenos Aires’ drinking water
Aguas Argentinas’ concession area includes the whole of the city of Buenos Aires (the Capital Federal district) and a large section of Greater Buenos Aires (see map).
Raw water from the Rio de la Plata is treated at the San Martin WTP in the Capital Federal and the General Belgrano WTP in Quilmes. From there, distribution commences through a network of underground tunnels, with water piped through large reinforced concrete aqueducts. From there on, the network branches out into a system of mains pipes with diameters starting at 0.5m. From this intermediate network, pipes of a smaller diameter carry water to customers. The total length of the network is 13,400km – the distance from Buenos Aires to Paris.
Distribution is currently complemented by a secondary system for supplying some of the areas not yet connected to the network. These temporarily receive water from groundwater sources.
One of the most significant additions to the network is the huge Saavedra-Moron tunnel. At 3.5m in diameter and nearly 15km long, the tunnel will join Saavedra in the Capital Federal with Moron and Tres de Febrero, carrying 36,000m3/hour of potable water from the San Martin WTP to more than 1M new customers.
When it started the project in 1996, Aguas Argentinas was faced with the dual challenge of building the tunnel and minimising inconvenience to local residents. The solution was to use the same technology involved in the construction of the Channel Tunnel which connects England and France.
At 30m below the surface a two-man tunnelling machine drills and extracts earth at the same time. All functions are computer controlled and the route programmed while maintaining a constant direction and position. Excavation is due to be finished in January 2000 and the first part of the tunnel will enter service in April.
The San Martin WTP
San Martin has access to one of the biggest surface water sources in the world – the Rio de la Plata. Water is abstracted at an intake 1.2km off the coast and is conveyed through a 5.4m diameter pipeline to the treatment plant. Raw water is then elevated to the head chambers where it is injected with a coagulant.
Raw water contains negatively charged microscopic particles of clay in a stable colloidal suspension. The coagulant – usually aluminium sulphate – destabilises the suspension, grouping the clay into larger flocs. Polyelectrolytes are used to give the flocs a larger size.
The San Martin plant has two types of sedimentation tanks. In conventional tanks with a horizontal flow of water, precipitated clay takes around two and a half hours to settle. New tanks, with a vertical flow, reduce settlement time allowing greater production. Adding the coagulant renders the water acidic. This is compensated for by adding lime to obtain a slightly alkaline pH.
Filtration through 130 sand filters ensures elimination of any remaining particles. The filters are cleaned daily by backwash, using clean water. Filtered water is then sent to underground tanks. To ensure disinfection, gaseous chlorine is injected into the intake of the tanks. San Martin’s current capacity is 3.1Mm3/d.
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