Lessons In Business Models For Water Infrastructure

The administration of water services requires commercially and fiscally efficient administration, which the private sector can help provide, says Jordi Valls, Director General of SUEZ Mexico. “It does not matter if the water management is public or private, it has to be well-managed,” he says, adding that it is only logical for the public and private sectors to collaborate in bringing their views to better address the issue. “Mixed-models must work as a close and collaborative partnership in which both sectors must have very well-defined duties and rights,” Valls says. “As the private sector, our duty is to provide a good service. Our success is not merely defined by economics but by when citizens are comfortable and happy.”
For a PPP collaboration to work, Valls emphasizes that the government must understand its role as both stakeholder and regulator. “The government fixes the pricing for citizens. The tariffs must introduce incentives for sustainable consumption,” he says. Optimum pricing must cover the cost of the service and of replacement of investment while punishing higher consumers, Valls adds. When venturing into water PPPs, there are many models to choose from, but SUEZ is interested in working with the government to develop successful PPP water projects via outsourced services, mixed companies and BOT, among other models,” Valls says. But not every model is suited to every need. For example, Valls explains that BOT has the advantage that the private sector invests the money that the government does not have immediately available.
The mixed-companies model also has benefits when tackling efficiency issues. For example, SUEZ started its concession with Aguas de Saltillo facing water scarcity and inefficiency. It decided on a mixed company model as the best to address these. “The main shareholder is the public sector through the City Council, holding 55 percent, and SUEZ holds the remaining 45 percent of the company’s shares,” he says.
Once the most appropriate model to enhance water management is chosen, the matter becomes one of finding the best technology for the given issue. In Saltillo it was water scarcity, meaning fixing leaks had to be prioritized. “We have strong capabilities to reduce this problem, which has been proven through our work with Aguas de Saltillo,” Valls says. “Our main investment was to split the pipelines into sectors, using sensors to understand how much water was being lost and where. We then modified the pressure to reduce the leakage.”
According to Valls, sectorization can also be applied to solving leaks in other cities. “The problem is that this system works based on sound and in cities that are too noisy it is hard to hear anything,” Valls explains. To overcome this, SUEZ decided to implement iDroloc technology. “It works with helium. The gas is introduced into the water network and the iDroloc machine can detect when the helium is released from the network, finding the leak.” The company hoped to use it in Saltillo by the end 2018 and it will also be proposing it to SACMEX’s new administration in 2019.
As for the incoming government, Valls asks for clarity. “I think it is important to clarify if the new administration wants to work via PPPs or not. I agree with transparency and clarity in choosing the best proposal,” he says. He mentions that when drafting tenders for water projects, and of any kind, the government should consider three factors. “First, if it is covering a public necessity. Second, if it is in a position to attract technology, service and financing providers and third, which guarantees can be provided.”