Presentation on theme: "May 2005 The French Water Services: Main present challenges."— Presentation transcript:
May 2005 The French Water Services: Main present challenges
May 2005 Page 2 Table of contents: main present challenges Introduction: Veolia Environment and Veolia Water. Part I: Based on principles of the Delegation of Public Services (DSP) and on hydrographic division of the French territory… Part II: … the French Water services face 2 main water challenges: 1 rst challenge: to cope with huge investment requirements during the next 10 years imposed, for a large part, by new environmental regulations but also by maintenance obligations, … 2 nd challenge: …without being obliged to increase too dramatically the tariff levels. Part III: China, an application in relation with the local constraints.
May 2005 Page 3 Introduction ( 1 ) Veolia Environment Veolia Environnement, the n°1 provider of environmental services to municipal and industrial clients in the world Veolia Environment is the only company to operate in all environmental services: water, waste management, energy services and passenger transportation (Water) (Power, Facilities management) (Solid Waste) (Public Transport) N° 1 in the world N° 1 in Europe for energy services N° 2 in the world Private operator N° 1 in Europe
May 2005 Page 4 Introduction ( 1 ) Veolia Environment Placed 128 th among Global 500 companies in 2004 Operator in over 75 countries on the 5 continents Revenue of € 24.7 Billion (€ 22.3 Billion excluding third party revenue) 270,000 employees Veolia Environment Main Figures Dalkia : 27% Connex : 9% Onyx 24% Veolia Water 40%
May 2005 Page 5 Introduction ( 2 ) Veolia Water More than 110 Million people served Operator in over 55 countries Revenue of € 9.8 Billion (€ 7.6 Billion excluding third party revenue) 67,800 employees Veolia Water Main Figures Municipal: 77 % Industrial: 4 % Technical solutions and construction: 19 %
May 2005 Page 6 Part I The principles of Public Service Delegation and of the decentralised hydrographic regional organisation
May 2005 Page 7 Equality of access Continuity, mutability and sustainability of Public Services Transparency of relations between the actors A – The Delegation of Public Services (1): 3 mains principles
May 2005 Page 8 A – The Delegation of Public Services (1): the contract Responsibilities: Institutional responsibilities Tariff to end users Ownership of assets Municipality Water assets Private operators Consumers: tariff x volume Municipal budget Subsidies Long term borrowing Sources of financing: Revenues Responsibilities: Technical Financial Services Scope of the agreement: Global or partial management Lease payment “DSP” Contract
May 2005 Page 9 In France: 90% of the PPPs are “ lease contracts ” VEOLIA Water manages around contracts with more than Municipalities. In 2004, VEOLIA Water contract renewal rate was 86%. PRIVATE SECTOR PUBLIC SECTOR Veolia Water 38% Ondeo (Suez) 21% Saur 10% Other private 1% Local Authorities 70% 30% (26 million customers) 18% 14% 7% 1% WATER WASTE WATER (17 million customers) 40% 60% A – The Delegation of Public Services (1): VEOLIA Environnement extensive lease contract experience
May 2005 Page 10 B – An investment decision process based on 6 decentralised hydrographic agencies
May 2005 Page 11 B – An organisation based on 6 natural hydrographic regions (“Agences de l’Eau”) The 1964 Law has divided France into 6 hydrographic administrative Regions, based on the 6 main rivers (Seine, Loire, Rhône, Garonne, Rhine and the Northern area) Each of this Region is managed by a Committee with representatives from : The different municipalities The end users Different public organisations designated by the State The hydrographic Regions responsibilities are threefold: Design the investments program according to the needs defined by the municipalities, end users, and various professionals (among which private operators) Define the amount of taxes which should be paid by the end users (through the tariff) in order to finance (or to contribute to finance) the part of the investments program Control the execution of the program
May 2005 Page 12 Part II 1 rst challenge: the investment requirements and its global financing structure
May 2005 Page 13 A – Structures of the investments requirements (1) Ex Year 2000: Global water financial needs Euro 17.8 billions Out of which:Operational costs needs: Euro 11.7 billions Investments financing: Euro 6.1 billions Out of which Drinking water: Euro 2.7 billions (Network: 1.8 billion – Treatment: 0.9 billion) Sanitation: Euro 3.4 billions (Network: 2.4 billion – Treatment: 1 billion) Source: National Audit Court December 2003
May 2005 Page 14 A – Structures of the investments requirements (2) Source: National Audit Court December 2003 Financial needs for the next 10 years New mandatory investments imposed by environmental regulations over 10 years - Drinking water: Euro 12.1 billions Out of which Treatment: Euro 4.5 billions Network: Euro 7.6 billions - Sanitation: Euro 9.15 billions (Mainly networks – Cities over 2,000 inhabitants) Regular maintenance investments: total Euro 3 billion a year (on average) - Drinking water: Euro 1.5 billion a year (mainly network) - Sanitation: Euro 1.5 billion a year (mainly network) Operational costs: between Euro 10 and 12 billions a year
May 2005 Page 15 B – Structures of the financing sources Operational needs: Euro 11.7 bilions Investments: Euro 6.1 billions Total: Euro 17.8 billions GLOBAL NEEDS (Ex: year 2000) THE MAIN SOURCES Department: 3 % Region: 1 % Municipal budget: 1 % 80 % END USERS: (Tariff x Volume) SUBSIDIES FROM PUBLIC AUTHORITIES: 5 % Subsidies (Infrastructures funds): 2 % Long term loans from Hydrographic Regions: 13 % SUBSIDIES OR SUBSIDISED LONG TERM LOANS: 15 % Source: BIPE - December 2003 (one of the leading European providers of forward-looking economic analyses and consulting services)
May 2005 Page 16 Part II 2 nd challenge : how to cope with the investments and cost challenges without being obliged to increase dramatically the tariffs levels ?
May 2005 Page 17 Water bill – What costs are covered ? How are they evaluated ? What costs are covered by the tariff structure ? (Based on year 2000) 42 % Treatment and distribution of drinking water 31 % Sanitation costs 17 %Hydrographical Agencies 10 %VAT + Tax Tariff structure 2 principles: - 1 water tariff by municipality or group of municipalities - Full cost recovery 2 methods: - Tariff directly linked with the volumes (with differences by levels of the volumes used) - Tariff calculated in 2 parts: a fixed part (17%)+ a proportional part linked to the volumes used (83%) Drinking water: 90 % of municipalities are using the 2 nd tariff structure Wastewater: 38 % of municipalities are using the 2 nd tariff structure
May 2005 Page 18 Factors which impacts the tariff level of each municipalities ? Treatment process Network: unique or separate Network length Wastewater collection efficiency % of wastewater collected Origin of the resources Treatment process before distribution Network length Rate of network maintenance Nature of the end users: corporates, industrials, etc impact of the tourist season SANITATIONDRINKING WATER
May 2005 Page 19 Evolution of the water tariff, all factors being considered From 1995 to 2004: The global costs of the water services has increased by 16 % Compared to a price index which has only increased from 6 % during the same period But yearly tariff increase has been decreasing: 1990 – 1994: + 15% 1994 – 1995: + 6.5% 1995 – 2004:+ 1.7% Presently, the tariff levels allow to cope with the investments and operational cost requirements.
May 2005 Page 20 Water Tariff in 5 French cities / areas AVERAGE WATER TARIFF in 2003(in Euro per m3) Local currency city 1: PARIS city 2: Syndicat d'Ile de France city 3: Bordeaux (Syndicat ) city 4: Lille (communauté urbaine ) city 5: Lyon (c ommunauté urbaine ) Service charge or fixed bill component (not related to consumption) Variable component, based on water consumption Based on 200m3/year Other charges on drinking water CHARGE FOR DRINKING WATER Based on 200m3/year Sewerage Waste water treatment Other charges VAT and/or other taxes TOTAL ANNUAL BILLED WATER CHARGES
May 2005 Page 21 Part III : China, an application in relation with the local constraints