The
news that Paris will not re-tender its water distribution contracts
should come as no surprise. Mario Alemi looks at how the move will
affect municipal relations with the private sector.
When the municipality
of Paris announced in June that water services in the capital would
return to
public hands, it pleased the municipalistes.
The French private water industry is, however, unlikely to let the decision
go without a fight. It now looks certain that Veolia and Suez Environnement
will not have the opportunity to renew their contracts (which generate
annual net income flows of about €60 million and €30 million,
respectively) with Eau de Paris, because no tender offer will take place
after the current contracts expire in December 2009.
Paris has been governed
for the last seven years by the Socialist Bernard Delanoë, after 14 years under the right-wing leadership of Jacques
Chirac. It was Chirac who, as Paris mayor in 1985, privatised the city’s
water distribution and billing, keeping water production and wastewater
collection in public hands.
When Delanoë won his first mandate, in 2001, the city council started
looking at water with a different attitude. Anne Le Strat, a Green activist
and an outspoken municipaliste, became the CEO of Eau de Paris, then
a company with both private and public capital. In April 2007, the 28%
stake held in private hands was repurchased from Eau et Force-Parisienne
des Eaux (Suez Environnement) and Compagnie des Eaux de Paris (Veolia
Environnement) and given to the state-owned financial institution Caisse
des Dépôts (see GWI April 2007 p11).
At the time, Le
Strat made clear that this was just the beginning, and in March 2008,
Delanoë won a second mandate as mayor of Paris, with
the full re-municipalisation of the capital’s water forming part
of his electoral programme. Le Strat became deputy mayor in charge of
water and sewerage, and subsequently announced the creation of a new
single operator for the water of Paris, which will take the form of an
EPIC (établissement public industriel et commercial).
“In six months we will have a new legal structure for Eau de Paris,” she
confirmed to GWI. “After that, in December 2009, we are going to
add water distribution and billing to this structure, once they have
both been re-municipalised.”
Many analysts see
the move as exclusively political and unilateral. “It
is not just political,” Le Strat emphasises. “It is both
a political and an economic move. Today, the city manages the production,
transportation and treatment of water. We are going to keep all that,
but we will add the distribution and the billing because we believe that
a single operator working on the whole chain will be more efficient.
In addition, the high costs of water production will be counterbalanced
by incomes from billing.”
The reversion of
the Paris contracts cannot be allowed to signal an end to collaboration
between
the public and private sectors in the capital’s
water sector. “Nowadays, we face new challenges for water, both
in terms of quantity, with high demand and increasingly difficult production,
and of quality, because of the introduction of higher purification standards,” says
Hélène Valade, VP for sustainable development at Lyonnaise
des Eaux, the Suez Environnement subsidiary in charge of water distribution
on the left bank of the Seine. “The public and private sectors
must collaborate, although I think that in the future we are going to
see a change in the way that collaboration will happen.”
If the public sector
claims that there has not been enough competition in the past in awarding
French contracts, the private sector can justifiably
answer that Paris has one of the highest network efficiencies (85%) and
one of the lowest water tariffs (€2.77/m3) of any European city.
Emmanuel Adler from AConsult points out that Suez and Veolia have won
most of the French contracts in water not because of French protectionism,
but because of the lack of big competitors from abroad. Here again, things
are changing, and Le Strat indicated to us that she does not exclude
collaboration with the private sector going forward. It is likely that
the private sector, at least in Paris, will still have a role to play
in the design, construction and operation of water treatment facilities,
and within this context, Le Strat is keen to see more international companies
entering the French market, putting further pressure on Suez and Veolia.
Whatever the motivation
behind this particular re-municipalisation, both the private and the
public sectors in France have something to be
worried about in the near future. The city council should consider that
the private sector does not just bring technological expertise, but also
a different way of managing manpower. Absorbing the 400 workers from
Suez and Veolia, and finding substitutes in those cases where they prefer
to stay with their former employer, might not be an easy task.
Private companies
should consider the recent wave of newly elected municipaliste mayors.
Grenoble’s water was re-municipalised in 2000, and even
in Lyon, where Compagnie Générale des Eaux was born in
1853, there are rumours about renegotiation. Lastly, and more imminently,
Veolia should think about its contract with the Greater Paris water authority – Syndicat
des Eaux d’Ile-de-France (SEDIF) – a €415 million contract
serving four million people and due to end in 2010. This could prove
to be perfect prey for local administrators, closer to Le Strat than
to Margaret Thatcher.
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