Concessions

Internationally recognized and reliable tool
Concession agreements are internationally recognized instruments allowing financial risks to be shifted from public authorities to private capital. They are used in projects for the rehabilitation existing water and wastewater plants and networks or for new construction of the same, thereby helping to secure basic public services.

Responsibility
BWI AG sees concessions as one of its most responsibility-laden activities in the international water business.  Concessions are based on complex legal instruments that take long-term social and political aspects as well as technical and commercial perspectives into account and must address the risks for the contracting parties appropriately.  Variables in this context include inflation-determining parameters and changing legislation and environmental protection regulations.  The analysis and establishment of tariff structures is crucial for the success of a concession, as is the modification of such structures, a particular challenge for public and private contracting partners.

Contents
Concessions regulate the construction, rehabilitation and/or expansion of plants and networks, their operation, repair and maintenance, and rate collection, while taking into account technical parameters specified by the concession grantor.

Implementation
There are a range of options for implementation: a new concession company may be established or existing water supply and/or wastewater disposal utility may be completely or partially purchased (share purchase).

Term
Concession agreements are concluded for a period of at least 20 years, or for an indefinite term, upon purchase of shares of the existing companies, for example.

Property
Property in the way of plants and facilities is either transferred into the custody of the concession company at the beginning of the contractual term, returning to the concession grantor upon termination of the contract, or upon purchase of shares in an existing company, it remains that company’s property.

Synopsis

• Public sector issues a concession for a specific area.
• Private partner is responsible for construction and/or rehabilitation and expansion of plants and networks, and for their operation, maintenance and repair. It is also responsible for rate collection from end customers.
• Concession company is established, or an existing water utility company is purchased.
• Duration: 25 - 30 years (in some cases unlimited). Ownership of the plants either returns to the public partner at the end of the concession term, or, in the case of purchase of an existing water utility company, remains entirely with the concession company.
• Public partner acts as a regulatory body, no longer serving as the primary provider of services to the population.
• Effective way to attain private capital for use rehabilitating existing systems and constructing new plants.
• Efficient operation of the system.
• Development of innovative technological solutions.