Towns and cities consider municipalizing water services as long-term contracts with foreign firms expire

06-10-2014

Municipalities around the country are debating the future of water and wastewater management as long-term contracts with foreign firms are due to expire. Within the next five years contracts on water management servicing two million people around the country will expire and city halls need to make a decision on whether to call new tenders or take over the management of this lucrative business themselves.

Photo: Jan RosenauerPhoto: Jan Rosenauer Among the big contracts due to expire are those on water management in České Budějovice (2018) Ostrava (2020) or the North Bohemia region (2020).

Debate on whether or not to municipalize water services has intensified with the approaching local elections and there have been calls to return water management into Czech hands.

Many of the contracts signed between towns and cities as the owners of waterworks and wastewater plants and companies operating them were signed without an open competition in the 1990s. That is no longer possible – a transparent competition is an essential condition for towns and cities to be able to get EU subsidies for water-management projects. Many mayors are now considering taking over wastewater management in the municipality with the help of a company they would have control over. “It is a big issue among mayors right now, the governor of Liberec Martin Půta, told the daily Mladá fronta Dnes –especially when they see that in Germany this model works well and the entire profit is channelled back into the waterworks.”

On the other hand experts warn that while the big foreign companies pay out dividends their management of the waterworks can be a lot more efficient than that of small local companies which would moreover be under the influence of local politicians. And a decision one way or another may not always automatically lead to cheaper water services, because many municipalities are repaying past investments into this sphere. Jiří Herman, the head of Čevak, which operates under the Austrian Energie AG says that 63 percent of the income is paid to the municipality as rent of the waterworks. We have a minimal profit of 1.7 percent, Herman told Mladá fronta Dnes.

Foreign companies have already expressed interest in taking part in new competitions on wastewater management. The four big players now on the market are Veolia, Ondeo, Energie AG and Aqualia. Japanese and Korean investors have also signalled an interest, but according to Grant Thornton Advisory, which acts as a consultant in the field, any competitions called are likely to be dominated by those four already well-established foreign firms.

06-10-2014