International Water Gets Czech Contract
Source: 
Prague Business Journal

After three years of trying, International Water has broken into the Czech Republic market by landing its first water services contract.

The company, which counts U.S. construction giant Bechtel among its major shareholders, has signed a 25-year lease to provide water services to Vodovody a Kanalizace Breclav (VaK).

International Water hopes the contract that has been cleared by a general meeting of VaK Breclav shareholders, will serve as a launch pad to take on the French utility companies that have won most of the water services contracts put up for grabs so far by local water companies.

"I think it is good for the Czech Republic to see a new entrant," said International Water's regional manager Alex Hewitt. "French water companies, Vivendi and Ondeo [formerly Lyonnaise Des Eaux] and their allies, already provide about two-thirds of the water services in the country."

International Water said the format of its bid, which includes an offer to VaK Breclav shareholders to buy shares in the company with a guaranteed buy-back price down the line, will probably be repeated in order to win fresh contracts. Local municipalities own 90 percent of VaK Breclav shares with the remaining 10 percent in private hands.

"It is an attractive proposal and I think we will repeat it [the format]," Hewitt said. "We are still very interested in South Moravia and East Bohemia. That's our main focus. These areas have not been polluted by French water companies and represent areas where we could build up our presence."

International Water faced a final round head-to-head with Ondeo at the start of the year to win the VaK Breclav lease to provide water services for around 118,000 people. Earlier contenders for the contract included Ceska Infrastrukturni, the company headed by Czech attorney Robert Pergl and local South Moravian investment company Avalcom, whose activities so far have focused on a local bus company and a local ceramics producer.

Pergl, the perpetual middleman, courted controversy by sometimes purporting to represent other utility companies although they said they had already cut all ties with him or had never had any in the first place. Some big name water services companies, such as Anglian Water, complained that sometimes when their top management arrived to discuss contracts they were told that a representative had already paid a visit.

Pergl attempted to engineer a regional deal, the so-called "Project Moravia" under which he tried package and arrange takeovers by foreign strategic investors of water services in eight regions covering one million consumers, including in Breclav. He was at one stage seen as a front-runner to land the VaK Breclav deal, and his failure to do so is seen as a serious setback for Ceska Infrastrukturni's regional ambitions.

Leading Czech bank Ceska Sporitelna was also linked to Pergl's plans, although it said earlier that it was acting for another strategic investor.

International Water's other main shareholders are British-based United Utilities, the biggest water company in the U.K., and Italy's Montedison. It is already one of the biggest water service companies in the Baltic states, Poland and Bulgaria. Until the VaK Breclav deal, however, International Water had failed to make waves locally, notably coming second to Vivendi Water in the tender to take over a long-term lease to provide the capital's water services through the existing company Prazske Vodovody a Kanalizace a year ago. Vivendi's bid of Kc 6.1 billion to win the tender was almost twice as high as International Water's and its size surprised many analysts and industry observers. Vivendi Water was largely responsible for a raft of local councils looking to cash in on their liquid assets.

Financial details of the lease contract had not released by International Water when PBJ went to press. The Breclav city council official dealing with the dossier was unavailable for contact.

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