ANNUAL REPORT 2010
ANNUAL REPORT 2010 Successful Water Privatisation
Š Carly Hitchcock 2010 Typesetting & Design Carly Hitchcock Typeset in Avenir Printer The Big Picture Printed in New Zealand ISBN 804-1-7681984-5-0
CONTENTS Introduction
04
United Water
08
Wastewater
12
Conservation
14
Wellington
16
Auckland
18
Singapore
20
Chile
22
4
Water Privatisation Introduction
INTRODUCTION In New Zealand, water contracts are held both by private water companies, and by Council Controlled Trading Organisations (CCTO’s). CCTO’s are council-owned organisations, which are run as separate non-profit businesses. The council ultimately has the final say on approving tariffs and other services. Water privatisation has been successful both in New Zealand and internationally.
Annual Report 2010
5
Those in support of privatisation argue that
There are usually five reasons to involve
governments are inefficient and lack the
the private sector in water services:
UNITED WATER
INTRODUCTION
Water Privatisation Introduction
therefore privatisation is often highly
•
Financing for investments
recommended for developing countries who
•
Need for technical expertise
already have large amounts of debt.
•
Increase efficiency
•
Improvement of service quality
•
Pressure from the World Bank as
In New Zealand in mid 2010, the Local Government Act 2002 Amendment Bill was
CONSERVATION
necessary expertise to run many services,
loan conditionalities.
(Public Private Partnerships). The changes
Water companies (both private and public)
made allow councils to enter into contracts with
typically provide water services such as: WELLINGTON
altered, in order to relax laws around PPP’s
private companies to run water services for up to 35 years (previously 15).
•
Water treatment and delivery
•
Wastewater removal and treatment
Public Private Partnerships (PPP’s) can be
•
Infrastructure management and repairs
successful as they allow councils to retain
•
Customer Service
ownership of water resources, while private AUCKLAND
companies provide the expertise and manage the water infrastructure. It is also beneficial as pricing and policy remains in
CHILE
SINGAPORE
the hands of the council.
Annual Report 2010
OWNERSHIP OFTEN DOES NOT MATTER AS MUCH AS SOMETIMES ARGUED. MOST CROSS-COUNTRY PAPERS ON UTILITIES FIND NO STATISTICALLY SIGNIFICANT DIFFERENCE IN EFFICIENCY SCORES BETWEEN PUBLIC AND PRIVATE PROVIDERS. World Bank
9
UNITED WATER UNDERTAKES ANNUAL CUSTOMER SURVEYS AND CONSISTENTLY RECEIVES GREATER THAN 90% SATISFACTION LEVELS ACROSS ALL ASPECTS OF SERVICE. United Water
9
INTRODUCTION
Water Privatisation United Water
Veolia (the parent company of United Water)
UNITED WATER
UNITED WATER ‘United Water delivers a full range of customer services, including the operation of call
contracts to provide water and wastewater
centres, receiving and recording work
services to 66 countries around the world.
requests, dispatching work crews, setting of
Veolia is a trusted company with a long history.
tariffs and customer billing. Each year United Water
The company was set up in France in 1873 to
responds to more than 100,000 water
provide water for the city of Lyons.
or wastewater service requests across
CONSERVATION
is a private company which currently holds
our operations.’ In New Zealand, United Water holds contracts to supply 7 New Zealand regions; Papakura, Franklin, Thames-Coromandel, Waitomo,
WELLINGTON
Ruapehu, Wellington, and Queenstown. United Water manages, operates and maintains water and wastewater treatment plants and networks. They serve the needs of over 350,000 New Zealander’s.
to assist governments and councils in this current economic downturn. United Water is forward-thinking, and can guarantee future
Papakura 47,000
Thames-Coromandel 25,000
Franklin 61,000 Waitomo 10,000
Ruapehu 14,000
water supplies, and is able to sustain future
AUCKLAND
United Water is ideally placed to be able
population growth in New Zealand. United within management and infrastructure, as
Wellington 188,000
well as increasing environmental responsibility by utilising practices such as dual-reticulation and wastewater recycling.
SINGAPORE
Water aims to continually increase efficiency
CHILE
Queenstown 24,000
Annual Report 2010
AMERICA 1. Argentina 2. Brazil 3. Canada 4. Chile 5. Colombia 6. Ecuador 7. Mexico 8. United States 9. Venezuela
EUROPE
27
15
22
3
31
10. Armenia 11. Austria 12. Belgium 13. Czech Republic 14. Denmark 15. Finland 16. France 17. Germany 18. Hungary 19. Ireland 20. Italy 21. Monaco 22. Norway 23. Netherlands 24. Poland 25. Portugal 26. Romania 27. Russia 28. Serbia 29. Slovakia 30. Spain 31. Sweden 32. Switzerland 33. Turkey 34. United Kingdom
19
34
8 25 30
14 23 24 12 17 13 16 32 11 29 18 26 21 20 28 53
35
9
5
37 38
6
51
47
50
10
43 39 42
44
45
7
33
56 49 54
48
36 40
2
46 52 1 4
26,600,000
7.4% FRANCE EUROPE
12,800,000
8.5% 11.2%
ASIA
TURNOVER BY REGION
44.3%
R&D BUDGET
AFRICA/ MIDDLE EAST/INDIA 28.6% AMERICA
41
13,800,000
AFRICA/MIDDLE EAST/INDIA
58
63 57 65 66
35. Algeria 36. Benin 37. Burkina Faso 38. Côte d’Ivoire 39. Egypt 40. Gabon 41. India 42. Israel 43. Lebanon 44. Libya 45. Morocco 46. Namibia 47. Niger 48. Oman 49. Qatar 50. Senegal 51. Saudi Arabia 52. South Africa 53. Tunisia 54. United Arab Emirates
People Supplied with Drinking Water 2005 2006 2007 2008 2009
0
10
20
30
40
50
60
70
80
90
100
90
100
Millions
People Connected to Wastewater
64
ASIA/PACIFIC
61
59 62
55
60
55. Australia 56. China 57. Hong Kong 58. Japan 59 Malaysia 60. New Zealand 61. Philippines 62. Singapore 63. South Korea 64. Taiwan 65. Thailand 66. Vietnam
2005 2006 2007 2008 2009
0
10
20
30
40
50
60
70
80
Millions
Water Infrastructure
Water Production Units Water Treatment Plants
OTHER DRINKING WATER
2005 2006 2007
WASTEWATER
2008
2,500
3,000
3,500
4,000
4,500
5,000
5,500
All statistics from Veolia 2009 Annual Report
12
Water Privatisation Wastewater
WASTEWATER MOA POINT SEWERAGE TREATMENT PLANT
In Wellington, under a Design-Build-Operate
(UNITED WATER) Wastewater Treatment Process.
(BOT) contract, United Water operates and
Moa Point.
maintains two wastewater treatment plants (one
At the treatment plant, sewerage travels
at Moa Point near the airport, one in Karori),
through a series of screens, tanks, bioreactors, clarifiers and ultraviolet treatments before
which serves a population of 188,000.
SCREENED
being discharge as liquid into Cook Strait.
While Capacity (a CCTO) provides water, wastewater, and storm water management to
SEDIMENT TANK
•
Wellington City and Hutt City.
Non-organic Large, non-organic materials such as toilet paper are first removed using screens. This SEDIMENT TANK rubbish is washed and compressed and
SCREENED
sent to the Southern Landfill for disposal. •
SEDIMENT TANK
Solid sewerage (sludge) As sewerage travels through sedimentation
WASHED
tanks, the majority of solids are removed. BIOREACTION The sludge is taken to the Southern Landfill Sludge Treatment Plant where it is dewatered (water removed from solids).
COMPRESSED
•
Effluent Sewerage (flowing)
UV LIGHT
A series of tanks and bioreactors use a combination of sedimentation and bacteria to decompose almost 70% of effluent material. Remaining liquid effluent is exposed to ultraviolet light to destroy SENT TO SOUTHERN LANDFILL
any harmful bacteria. The treated liquid is LIQUID PIPED INTO COOK STRAIT
finally discharged into Cook Strait.
Annual Report 2010
MOA POINT SEWERAGE TREATMENT PLANT (UNITED WATER)
SCREENED
SEDIMENT TANK
SEDIMENT TANK
SCREENED
SEDIMENT TANK
WASHED BIOREACTION
COMPRESSED UV LIGHT
SENT TO SOUTHERN LANDFILL
LIQUID PIPED INTO COOK STRAIT
14
Water Privatisation Conservation
CONSERVATION In many areas of New Zealand, water is becoming scarce. This is due to climate change, residential and commercial water use, and for electricity generation. Putting a price on water will encourage people to conserve this valuable asset, which is necessary for our tourism and export industries. Mandatory water efficiency labelling of appliances is already in use, and can be seen on water-using appliances such as washing machines and dishwashers. The quality of our water is also under threat. We need to reduce contaminants both in the natural environment (rivers, lakes, oceans) and in our drinking water. Water metering is an option which could be applied throughout New Zealand, as statistics prove that regions with water meters use 190 litres per head per day, whereas those without meters can use over 300 litres per head per day. Incentives for conservation do need to be applied, as many companies often need to charge more for lower water usage, in order to recover costs.
Annual Report 2010
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SINGAPORE
AUCKLAND
2
0 WELLINGTON
Conserve water to improve water quality
16
14
12
10
8 CONSERVATION
Priority 2
Reduce stormwater management costs and impacts
Reduce environmental costs and impacts
Priority 1
Reduce consumption to reduce infrastructure costs
Political desire to push water conservation as a sustainability measure
The need to conserve due to supply constraints
# of councils
Primary Drivers for Conservation Programmes Priority 3
UNITED WATER
INTRODUCTION
Water Privatisation Conservation
15
20
18
6
4
Annual Report 2010
16
Water Privatisation Wellington
WELLINGTON Water meters may be an appropriate option for
Water metering is already in place in Auckland
Wellington residents, as this will delay the need
and other parts of New Zealand, and is a
to build a $142m dam in Whakatikei Valley, near
proven way to encourage conservation. Meters
Upper Hutt, for up to 20 years. Another option
can also be installed simply to raise awareness,
currently being explored is the building of a
without charging the user.
new water storage lake near Kaitoke. A survey by the Business Council found that Wellington residents currently pay for their
most Wellington City residents support water
water services through rates, but around 1800
use charges, but Hutt Valley residents are split
households have opted to use water meters.
and the majority of Porirua residents oppose
Users pay for water through rates, and with a
household metering.
one-off fee for being connected to the water supply. 11 out of 73 national councils currently
“We’ve tried for years to get Wellingtonians to
meter domestic water supply. Households
voluntarily reduce their consumption but we
pay according to how many cubic metres they
haven’t been successful.”
use. In Wellington most businesses have water
Mayor Kerry Prendergast
meters and are charged by how much they use. In October 2009 Capacity recommended to the
“Without metering and direct charging for actual
Wellington City Council that all of Wellington
use, there was little visible reward for people to
be metered if it exceeds its current level of
make much needed changes.”
water use. Wellingtonians currently use 220
Council chief executive Peter Neilson
litres of water per head, per day. Water supplies are under pressure as the population is increasing by 1% each year, while water consumption will need to decrease by at least this much in order to cope with the population increases. Supplies are already stretched to their limits during dry summers. There are currently plans to trial water meters in parts of Lower Hutt, Porirua and Wellington City in late 2010/early 2011.
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17
DAILY WATER USE
METERED
NON-METERED
Statistics acquired from Beacon Pathway: Best Practice Water
800
Efficiency Policy and Regulations. Document prepared in 2008. All
700
councils in New Zealand were
600
emailed a set of questions about water consumption statistics. There
400
was a 55% response rate. Councils where water is un-metered may have
300
included gross water usage as part 200
of their domestic water usage, as actual household water usage cannot
100
CONSERVATION
their water metering status and
500
be calculated.
WELLINGTON
QUEENSTOWN
KAPITI
KAIKOURA
SOUTH TARANAKI
CHRISTCHURCH
WELLINGTON
TAURANGA
PAPAKURA
MANUKAU
RODNEY
WAITAKERE
0
NELSON
Percentage of household water use Bath/Shower
in New Zealand.
HOUSEHOLD WATER USE
AUCKLAND
Toilet Garden Laundry
Statistics show that most councils Voluntary Incentives or Subsidies
WATER CONSERVATION METHODS
prefer voluntary conservation methods. Other methods include
SINGAPORE
Kitchen
resource consent (such as requiring low flow devices to be installed), and charging for excessive use.
Resource Consent District Plan Changes
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LITRES/HEAD/DAY
UNITED WATER
INTRODUCTION
Water Privatisation Wellington
Other
Annual Report 2010
18
l Investment ion)
Water Privatisation Auckland
Change in Water Consumption
Revenue Funded Capital Investment Debt Funded Revenue funded
4
2004/05
2004/05
5
2005/06
2005/06
2006/07
2006/07
2007/08
2007/08
2008/09
2008/09
6
Commercial
Residential
Debt Funded
7
8
9
0
10
20
30 Million ($)
Million ($)
Statistics acquired from Metrowater Annual Report 2009. Tight control of overheads in response to declining revenue enabled operating costs to be held at $28.3 million, just 1.2% up on the previous year. Along with owning and maintaining $1.1 billion of water supply and wastewater assets, Metrowater manages a growing capital investment programme, with additional assets worth $56 million.
Annual Report 2010
40
50
60
-8
-6
-4
-2 Percentage %
0
2
4
19
INTRODUCTION
Water Privatisation Auckland
Watercare will provide water and wastewater
and is expected to grow by 40% by 2026. This
services for 1.4 million people. Watercare
puts increasing pressure onto the regions
Services will take over on 1 November 2010,
water services, and by 2026 an additional
and is planning on changing pricing on 1 July
water supply will need to be sourced. In 1994
2011. Water users in Manukau will likely face
Auckland suffered a severe water shortage,
price increases (as their prices are currently
and as a result the council changed the way
the lowest in the city), but all other areas
it now manages water. After the shortage,
will receive decreases. The flat rate for most
conservation methods were used to decrease
regions is likely to be $1.30 per 1000 litres. For
water use, these included the use of; dual flush
an average household water use of 600 litres
toilets, low flow systems and rain tanks for
per day, residents should save over $100 a year.
CONSERVATION
Auckland is the largest region in New Zealand,
UNITED WATER
AUCKLAND
WELLINGTON
non-potable water. In Auckland, various water services operate
households the option to install a ‘third pipe’.
water meters throughout most regions. Water
This pipe uses treated stormwater, and is
prices range from $1.28 to $1.81 per 1000 litres
intended for toilets and outdoors water use
used. MetroWater offer water and wastewater
only. This water is charged at a cheaper rate
services for central Auckland. Under the new
than potable water, which provides an incentive
SuperCity, all water utilities (apart from the
to install the pipe.
AUCKLAND
From 2009, Auckland council has given
United Water Concession in Papakura) will be combined into one; Watercare Services. Watercare is a CCTO, which means that any surplus profit made (that which is not reinvested in the infrastructure) must be returned to the
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SINGAPORE
council as a charitable payment.
Annual Report 2010
20
Water Privatisation Singapore
SINGAPORE Singapore, once part of Malaysia, is a small
Singapore is also renowned for its holistic
country with no natural groundwater or aquifers,
approach to water management has meant
and relies on Malaysia for 40% of its water
that today, it has only 5% of unaccounted-for
supply. Water agreements were signed in 1961
water, one of the lowest levels in the world
and 1962, lasting til 2011 and 2061 respectively.
(Wellington’s is 17%). In many countries
The price of the water is very low at 3 Malaysian
unaccountable water losses (such as
cents per 1000 gallons.
underground leaks) add to expenses both for the council, and the consumer.
Singapore has never been able to be selfsufficient, due to their population of 4.6 million,
It is evident that through its relationship with
and a land area of less than 700km2. It is
Malaysia, the Singapore government was able
officially classified as a ‘water-stressed’ nation.
to recover, and now is on its way to becoming
Singapore is planning on cutting water imports
self-sufficient. The government plans to spend
from Malaysia in 2011, when the contract
US $1.74bn on further development of water
runs out, and is currently exploring alternative
infrastructure, and also plans to spend millions
methods such as desalination, purification of
on R&D, in order to become a world leader in
waste water, and a larger water catchment area.
water technologies.
Singapore has already implemented a BuildOperate-Transfer contract with Singspring to create a desalination plant. Recycled wastewater, marketed as NEWater and sold at supermarkets, has been very successful thus far. NEWater uses technologically advanced membrane technologies involving microfiltration, reverse osmosis and UV disinfection. The resulting water even exceeds the World Health Organisation’s standards for drinking water. Currently there are four NEWater plants which meet 15% of Singapore’s water needs, while a fifth plant under construction will boost this to 30%.
Water Privatisation Singapore
21
UNITED WATER
INTRODUCTION
Water Privatisation Singapore
SINGAPORE WATER INFRASTRUCTURE Rainfall Catchment Lakes
CONSERVATION
NEWater treatment plants
Woodlands SARIMBUN LOWER SELETAR
KRANJI
PUNGGOL
UPPER SELETAR SERANGOON
POYAN UPPER PEIRCE
TENGEH
LOWER PEIRCE
MACRITCHIE JURONG LAKE
BEDOK
NEWater
NEWater NEWater
PANDAN
WELLINGTON
MURAI
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SINGAPORE
AUCKLAND
MARINA
Water Privatisation Singapore
22
Water Privatisation Chile
CHILE Chile was one of the first countries to begin privatising assets in the 1980s; including power and telecommunications. The only assets which remained under public control were water and sanitation. In late 1998 the government decided to privatise its water as it had promised to spend more money on social systems, and needed to recoup costs. In less than 3 years more than three quarters of residents were being served by private companies. The contracts used were either concessions or full asset sales. The private companies were also brought in to manage the countries wastewater needs, and they brought both the technology and the economic power to do this. While rates under private companies did increase, they also re-invested 70% more of this money than public companies did during the same time-frame. Due to the rise in water prices, residents decreased overall consumption by 10% in three years. Privatisation has not negatively affected the poor, as the government had already put in place strategies for lower income households to cope with the tariffs.
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23
Superintendency of Corporations and Insurance Companies financial
Private
Public
statements for publicly traded water and sanitation companies.
Sales and administrative expenses
Sales and administrative expenses
Return on equity
Return on equity
Return on assets
Return on assets
Operating income/sales
Operating income/sales 0
10
20
30
40
50
AUCKLAND
Percentage
Efficiency Performance (2001) Private
Public
CONSERVATION
Statistics acquired from Chile,
WELLINGTON
Efficiency Performance (1998)
UNITED WATER
INTRODUCTION
Water Privatisation Chile
SINGAPORE
Sales and administrative expenses Return on equity Return on assets
0
10
20
30
40
CHILE
Operating income/sales 50
Percentage
Annual Report 2010