Veolia’s travails in Gabon

A recent study found that Gabon’s water concessionaire is falling short of expectations and will not meet its infrastructure investment targets. The report fails to represent the whole picture, argues Veolia’s Patrice Fonlladosa.

The government of Gabon has asked Société d’Eau et d’Energie du Gabon (SEEG), the company in charge of the country’s electricity and water production and distribution, to produce a five-year investment plan following a recent audit of the company’s performance.

SEEG, whose majority shareholder (51%) is Veolia Water India Africa, signed a 20-year concession in 1997, but the company has been widely criticised since 2007 for failing to keep up with demand, while providing a poor and erratic service.

In April 2010, the government commissioned Deloitte to carry out an audit of the company’s performance. The audit concluded that SEEG had not met expectations in terms of service, and had fallen short of its infrastructure investment targets.

Veolia maintains that the audit doesn’t tell the full story. “Water and electricity demand have increased much faster than expected in the concession contract – that’s a fact,” admits Patrice Fonlladosa, Veolia Environnement delegate for Africa. “But it’s also a fact that the concession contract requires the state to invest in electricity generation facilities above 10MW – something it did not do between 1997 and 2010. So all our efforts at SEEG have been dedicated to keeping up with demand.”

Fonlladosa says that SEEG has already invested more than two thirds of its total commitment under the contract – approximately CFA300 billion ($624 million) out of a total of CFA450 billion ($936 million). “The audit acknowledges that this is more than would be expected of us by now,” he says. “We are about to start discussing the new investment plan – and its financing – with the government.”

Fonlladosa says that SEEG had already submitted a comprehensive investment plan to the government back in June 2010, yet it was never discussed. He also laments the fact that the final audit contained a number of mistakes regarding investment responsibilities, something SEEG is in the process of addressing with Deloitte.

On a positive note, the government followed the audit’s recommendation to transfer the management of SEEG’s contract from the Ministry of Energy and Water Resources (the client) to the newly created independent water and electricity regulator, Agence de Régulation de l’Eau Potable et de l’Energie. In a statement, the government said that one of the regulator’s tasks would be to revise water and electricity tariffs, a measure welcomed by SEEG.

SEEG, which is 51% owned by Veolia Water India Africa (the remainder is held by small and medium-sized Gabonese investors), is also in the process of gaining a new shareholder. Veolia, which owns 80% of Veolia Water India Africa, is selling 51% of its stake in SEEG to French electricity giant EDF for a reported €15 million. The deal has not yet been finalised, but Fonlladosa views it as positive for the local market. “To bring EDF on board would be a natural reinforcement of capacity. EDF is number one in electricity, so it’s basically the two ‘best in class’ providing expertise to the state of Gabon.”

This article was published in Global Water Intelligence in March 2011.

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