The company Águas do Algarve SA, until now only responsible for the management and supply of high water to municipalities, also wants to enter the low water business, that is, direct supply to consumers. A business that could cover the entire chain of basic sanitation, also encompassing sewerage networks.
Carlos Manuel Martins, Executive President of Águas do Algarve (AdA), in an interview with Sul Informação, revealed that «there are a number of opportunities that will go through a line of negotiation that the company will soon have with the Municipalities», namely «on partnerships so that AdA can manage water and sanitation, whenever the municipalities see an interest in it». For the head of the Águas de Portugal group company, this is an «opportunity for more efficient management».
The topic is not one of the easiest to discuss with the municipalities, but the first of many meetings is already scheduled for this month of November. Carlos Martins said that "we have already had some previous conversations [with municipalities], but not yet concrete".
Faced with this claim made by Águas do Algarve, Jorge Botelho, president of the Tavira City Council and the Intermunicipal Community of the Algarve (AMAL), warns: «this eventual claim, this model of verticalization or another, to materialize, must be discussed with the municipalities, within AMAL”, since this “is too vital a matter to remain only at the level of administrative councils”.
The Tavirense mayor even admits that «it may be legitimate for Águas do Algarve to manage systems at low levels», that is, to go from its business of producing and supplying water to municipalities to directly supplying consumers. But he stresses that, before taking any decision, it is necessary to negotiate a series of delicate issues: «see the necessary investments, tariff values, competitiveness and if the core of AdA is that business».
Jorge Botelho: «The Municipal Councils will always fight for the tariff to be as low as possible and for the tariff to be enough to pay for consumption and infrastructure»
This is because, underlines Jorge Botelho, this “is a business that the Councils manage, that they manage well, and in favor of the citizens, always trying to keep the tariffs as low as possible”.
“The City Councils will always fight for the tariff to be as low as possible and for the tariff to be enough to pay for consumption and infrastructure. We don't have the pretension of excessive profit, just to manage the system well so that it doesn't cause losses, with a socially acceptable tariff, so that the investment can be made and amortized and people have water at the lowest possible price. And that is what has to be absolutely safeguarded».
Now, adds the AMAL president, «I don't know if, with total management of Águas do Algarve, this would continue to be the case. But, as we do not rigorously discuss anything, this is an exercise that has not been done».
It is precisely to discuss and negotiate what AdA's executive president intends to do. Thus, this month, after intense work to prepare a proposal that will serve as a basis for negotiation, Carlos Manuel Martins says that «we may be in a position to respond to the main concerns of the municipalities, in terms of investments to be made, tariffs to be charged to final customers, citizens, projection of conditions under which the integration of municipal workers involved in these activities could occur, any rents payable to municipalities for the use of municipal infrastructures».
“With this frame of reference, let's start a more realistic conversation. Afterwards, it will be up to the municipalities to assess the goodness of the proposal, but we are very committed so that a partnership of this nature can be a success for the region». “We are going to see if we can find space for there to be a common interest here between AdA and the Municipalities”, stresses the official.
In your interview with Sul Informação, Carlos Martins guarantees that preliminary talks on the subject have already taken place, with “a set of five, six municipalities (in the past there was already a number approaching nine) that will have expressed interest” in a proposal by Águas do Algarve.
But, he admits, "because they were never confronted with a stabilized frame of reference, there was never a situation of beginning to have compromises between the parties."
For the company of the Águas de Portugal group, entering the low water and sanitation network business will be more interesting the greater the number of municipalities that enter the system.
Carlos Manuel Martins: «A partnership like this turns out to be more interesting when there are more municipalities involved, as the effect of scale plays a decisive role in the tariffs to be practiced»
"A partnership like this turns out to be more interesting when there are more municipalities involved, as the scale effect plays a decisive role in the tariffs to be practiced", explains the executive president of AdA.
“If there are a higher number of municipalities, the final tariffs end up being more interesting, or we can make more investment or pay more rent for the use of municipal infrastructure, giving the municipalities also greater comfort. As fewer municipalities join, it starts to become less interesting, because we are not talking about municipalities that have the same conditions – there are some that are more interesting from the point of view of the commercial area, and others that have a more complex and cumbersome situation», he says.
But Carlos Manuel Martins leaves a guarantee, responding in advance to one of the greatest fears of mayors: «what matters is that all Municipalities are available to, first, have equal rates everywhere and that they are interesting rates from the point of view social, not aggravating tariff patterns in the region».
For Águas de Portugal, this entry into the business of water and sewerage networks in low could still allow kill two birds with one stone. There are municipalities that still maintain huge debts to the company – although the administrator did not want to reveal which municipalities and the respective debt amounts.
«During 2014, thanks to the agreements that the municipalities made within the scope of the PAEL, this allowed a good part of them to have paid off their historic debts to AdA. Within the scope of our mandate, we have had the opportunity to start a conversation with those situations that, in our view, indicated some more critical aspects. We spoke with four or five municipalities and we are convinced that there will be, in two or three cases, the possibility that the debt itself may be acquired by banking institutions, which would allow, on the one hand, better interest rates for municipalities, and , on the other hand, the inflow of money to the company's treasury. This will make it possible to solve two or three cases».
But, in the others, the debt situation remains. And this debt could be integrated into negotiations with Águas do Algarve. In other words, if these municipalities agreed to hand over the management of water distribution and sewage networks to the company, this would be part of the compensation from both parties. A situation that the executive president of AdA considers could be “interesting” in some cases, for the most indebted municipalities.
But this issue, as well as the other details of the business, will only start to be debated when the company Águas do Algarve presents its global proposal to the municipalities, still during this month of November.
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