A Primer (five reasons why you should challenge Veolia

Transcription

A Primer (five reasons why you should challenge Veolia
Veolia in Asia-Pacific: A Primer (five reasons why you should challenge Veolia)
By: Mary Ann Manahan*
April 13, 2015
1. Alarming trend: Veolia, a French multinational, aims for global domination in the fields of
water, waste management and energy
Veolia Environnement is a French multinational company that provides a full range of environmental
management services in the fields of water, waste management (collection, pipe systems
maintenance, urban cleaning services and waste-flow management, as well as waste treatment and
recycling), energy (except trading, production and sale) and transportation in 67 countries covering
nearly 163 million people. Veolia was originally part of Vivendi (previously Generale des Eaux), which
ran into serious financial and debt troubles after its expansion into media, film, telecommunications,
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music and book publishing.
Dubbed as a water baron, Veolia is one of the twin global giants that dominates the market in water
and wastewater management; the other is Suez. In 2013, it reported €22.3 B in revenue, which is
1.8% less than the previous year at constant scope and exchange rates; while its financial debt
decreased to € 8.2 B compared to € 10.8B in 2012. Veolia has varied clientele ranging from
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individuals to municipalities, to industries andbusiness. Itemploys 202,800 workers around the world.
Veolia Water remains the multinational’s major operating segment contributing 45.8% (€10.2 B)
share toits overall revenue. Veolia Environmental Services, which accounts for its waste and raw
materials, has a 36.2% (€8.1 B) share; Veolia Energy with 16.8% (€3.7 B) share and other services,
1.2% (€0.3 B).
Veolia Water operates 4,532 water production plants and 3,442 wastewater treatment plants. Its
waste division has 570,000 business customers (excluding industrial maintenance) and 719 wasteprocessing facilities. Finally, its energy segment operates 770 local and district heating and cooling
networks, manages 163,000 energy systems and 4,300 industrial sites.
Europe is still Veolia’s traditional market, with half of its business operating in France, UK, Germany,
Central and Eastern Europe, and the rest of the continent. Outside of the region, Asia Pacific
(including Australia and New Zealand) makes up 9.1%, followed by North America (8.5%), Africa and
the Middle East (3.9%) and South America (1.1%).
2. Wolf in sheep's clothing: Restructured Veolia in 2011 and a New Veolia in 2012
Owing to the economic crisis in Italy, North Africa and the US, Veolia suffered a net loss in its
revenues. For this reason, in 2011, the company announced a corporate overhaul that included
divestitures, restructuring and a geographical scale back.
The result of its so-called transformation is a new brand and slogan: “resourcing the world is what we
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do” . The 'transformed' company capitalized on the climate crisis, resource scarcity, new development
challenges such as urbanization, as well as emerging opportunities in food, mining, oil and gas, toxic
pollution clean-up and other raw material recovery, and environmental services. Employing a
sustainable development coordinator, its 2013 Annual and Sustainability Report can be mistaken as
any civil society or UN document in the sense that the New Veolia talks about “designing and
implementing solutions aimed at improving access to resources while at the same time protecting and
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renewing those same resources” . This is a significant shift as the French multinational now talks
about (a) creating high added value, (b) addressing environmental requirements, economic and social
concerns and (c) a circular economy where water, wastewater and energy are interconnected. Its
Chief Operating Officer François Bertreau further adds that “The new Veolia is more customerfocused, better equipped to deal with the specific characteristics of its markets and structured to make
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even more progress.”
The company’s new strategy is now three-fold: target the most promising environmental markets, i.e.
those that are supported by strong demand and solvent clients and where it has a distinctive
competitive edge; increase business with industrial customers; and focus on the most dynamic
countries and regions.
It also streamlined its organization—integrated its operations, established a single Veolia in each
country, and set up regional management teams. A new department was created—Innovation and
Markets--which aims to create new business for the New Veolia, for instance transforming a client’s
waste into energy for another. In 2013, this New Veolia won new contracts—half from the traditional
markets and the remaining half in emerging economies and fast growing regions.
But behind Veolia’s media-savvy, politically correct slogan and branding is the fact that the company
intends to profit from various interrelated crises. It expects to win new contracts (which it has already,
in 2014, it secured more than €9 Billion in new contracts) and strengthen its position in its traditional
markets.
In other words: new image, new sources of profits.
3. Increasing presence--and therefore revenues--in Asia-Pacific in the last 10 years
In the last 10 years, Veolia's revenues in Asia-Pacific has grown exponentially from €391 M to
€2.0261 these largely came from contracts in the water sector. The growth is expected as the
French company has looked at China and Australia as niche and main ‘markets’ outside of Europe. It
has contracts in Australia, Bangladesh, China, India, Japan, Malaysia, New Zealand, Philippines,
Singapore, Taiwan, South Korea, Sri Lanka and Vietnam.
It employs 26,081 workers in the region (4,168 employees in Ocenia and 21,913 in Asia).
In terms of water management (drinking water production, distribution, customer relations, and
wastewater treatment) in municipalities, Veolia has won multi-million Euro contracts through various
mechanisms including build-operate-transfer (BOT) and PPPs.
Some examples:
Australia
Veolia has a number of wastewater and water supply contracts in the country. It has been contracted
by Sydney Water, a public water company, to design, build and operate a sewage/wastewater
treatment facility in the Gerringong-Gerroa area. In 2014, Veolia secured a 10-year operation for the
production of drinking water and wastewater treatment plants worth more than €176M in Hunter
Water, Australia. Further, it upgraded three wastewater treatment plants at Port Kembla, Wollongong
in New South Wales, where it designed, built and operated the facilities.
China
In 1997, Veolia won its first management contract in the city of Tianjin. China has been seen as a
main market by Veolia in terms of industrial and municipal clientele. Overall, the company is
responsible for the water supply of more than 17 municipalities, autonomous regions and special
administrative regions including Chengdu, Beijing, Nangchang, Shenzen and Tianjin comprising a
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population of about 43 million people. In Shanghai-Pudong, Shanghai’s business district and a
leading economic and financial center in Asia and the world, Veolia with the Pudong Water
Corporation are managing Pudong’s entire water service for 4 million people under a Private-Public
Partnership (PPP) contract since 2005. The contract is a first in China—with Veolia producing 1.5
million cubic meters of water daily. It also provides water supply in the four districts of Lanzhou
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province, serving 2.4 million people.
India
In 2012, Veolia won three separate contracts—two in the capital city of New Delhi and one in the city
of Nagpur, state of Maharashtra. On March 2012, Orange City Water Limited (OCWL), a joint venture
between Veolia and an Indian company, was awarded a 25-year Private-Public Partnership under the
Nagpur Municipal Corporation’s ambitious Jawarhalal Nehru National Urban Renewal Mission to
operate and maintain the city’s entire water network.
On November 12, 2012, Veolia entered into a joint venture with Swach Environment and won a 15year contract to manage western New Delhi’s drinking water, production and distribution as well as
the management of the water department. Earlier in May of that year, Veolia was awarded a 13-year
contract by the city, worth US$ 54 million, to build and operate a new wastewater treatment plant that
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will serve New Delhi’s west zone.
Japan
Veolia has been active in Japan since 2002. It manages numerous contracts throughout the country,
which covers 3 million people for wastewater services alone. Further, it has water service
management contacts in the cities of Tokyo, Kyoto (2012 contract) and Osaka, where the company
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serves 25 million people or 20% of the country’s population.
On February 2012, three contracts valued at more than US$ 66 million were awarded to Veolia Water.
The company will provide water and wastewater services for the cities of Hiroshima, Kyoto and
Matsuyama. Water was awarded operate and maintain contracts to provide water and wastewater
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services for the cities of Hiroshima, Kyoto and Matsuyama.
But in 2013, Veolia was awarded its first comprehensive public service management contract in the
archipelago, in the tourist town of Hakone known for its hotsprings or okone. The US$13 B, 5-year
contract covers the complete management of water services in the districts of Midono, Italy and
Shinanogi, where there are raw water resources, treatment plants, and distributions networks. As the
only multinational operating under this model in Japan, Veolia will produce 20,000m3 of water each
day, serve 6,200 people, and operate 3 plants and 7 pumping stations. The company sees this as an
opening to secure more contracts in the prefecture where 9 million people are residing.
South Korea
Veolia has been present in South Korea since 2001. On March 2001, Veolia entered into a joint
venture with Hundai Construction in the state of Chilgok and was awarded a build-operate-transfer
contract for the operation of 2 existing wastewater treatment plants over the next 23 years as well as
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the design, financing and construction of a new plant.
In December 2001, Veolia was awarded by the municipality of Incheon a 20-year build, operate and
transfer (BOT) contract to run two wastewater treatment plants in Songdo and Mansu areas. Veolia
Korea partnered with Samsung Engineering (80-20 partnership). This was the first BOT contract by a
South Korean municipality in the water sector. The construction of the two plants took 30 months,
which have a total capacity of 100,000 cubic meters per day.
More recently, Veolia Korea has won a 10-year contract to supply steam to Hongwon Paper
Manufacturing, one of the major paper and pulp companies in the country. Amounting to €150 million,
this is the first energy services contract for Veolia in South Korea.
These examples show how Asia has become an important market for Veolia. More than a decade
ago, the company has less water business in the whole Asia-Pacific than Africa and Latin America.
With the growth in the region and more countries liberalizing their water sectors, Veolia was able to
also grow its business, win more contracts and therefore, expand its presence.
4. Water contract controversies— price hikes, mal-performance, inefficiencies, tap water
pollution and corruption
Veolia Asia has suffered a number of scandals and controversies in its water operations in the region.
This can be summed up to price hikes, irregularities in the bidding process, bad performance in terms
of meeting promised targets, inefficiencies, and tap water pollution.
In 1995, the city of Adelaide signed a US$ 1.5 billion contract with United Water, a joint venture of
Veolia and Thames Water. The contract handed over the waterworks of the city to the company. But
irregularities in the bidding process led to government investigations and parliamentary inquiry. Over
the next years of the company’s operation, basic water rates rose to 59% and workers lost their
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jobs.
In Nagpur, India, Orange City Water Limited, a joint venture between Veolia and Vishwaraj
Environment, an Indian infrastructure company, has failed to deliver on its promises of infrastructure
improvements and 24/7 uninterrupted water service. Instead, “low-income residents have endured
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multiple project delays, inequitable water distribution and service shutdowns.” Protests from
residents on contract violations and obligations and allegations of corruption have compelled city
officials to conduct investigations and public hearings. Under OCWL’s operations, two-third of
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Nagpur’s water was also lost with no clear explanations—that’s 432 million liters each day enough
to provide for the basic water needs of 8.64 million people per day.
In China, various cases of tap water pollution have been reported by Chinese civil society groups
such as Globalization Monitor in Hong Kong. The company was involved in 13 water pollution case
since 2007 in different cities around the country, including Shanghai, Beijing, Qingdao, Zhuhai,
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Haikou, Urumqi and Lanzhou. In the northwestern Chinese city of Lanzhou, province of Gansu, a
high level of benzene was found in tap water—200 mg per liter, which is 20 times higher than the
country’s national safety limits of 10 mg per liter. Later on, local authorities attributed this to the crude
oil leaking from Veolia’s pipeline, which affected 2.4 million people. Similarly, Shanghai Pudong
Veolia Water Co. Ltd., ironically hailed as a success story, was fined by the Chinese government for
violating waste pollution prevention measures and for discharging sewage beyond the allowed limit in
the first quarter of 2013. In Qingdao, Veolia’s Maidao sewage treatment plant was found to contain
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excessive levels of fecal coliform similar to the case of its plant in Haikou.
5.
Cancellation of Contracts
Research groups such as Public Services International Research Unit has documented at least two
contracts that were cancelled in China (Xian Water in 2002) and Malaysia (Selangor’s BOT contract
to operate 26 water treatment plants). Two more proposals were abandoned—one in Taiwan where
negotiations on a water treatment plant failed and in the Philippines (Cebu), where opposition by the
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local water union compelled Veolia’s local partner to drop its unsolicited BOT proposal.
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* Mary Ann Manahan is a program officer with Focus on the Global South-Philippines. She works on
the commons—land and water, social, gender, and environmental justice issues. She maybe reached
at [email protected].
ENDNOTES i
Ann-Christin Sjolander Holland (2006), “The Water Business: Corporations versus People”, Zed Books, p. 15.
See Veolia 2013 Annual and Sustainability Report, http://www.veoliawaterst-sea.com/vwst/ressources/files/1/37353,RADD-Veolia2013_GB-1.pdf (Accessed April 1, 2015), pp.68-69.
iii
Ibid, p. 8.
iv
Ibid.
v
Ibid., p. 17.
ii
vi
Globalization Monitor, An Open Letter to Veolia Environment S.A. regarding tap water pollution in Lanzhou., March 6, 214,
http://globalmon.org.hk/content/open-letter-veolia-environment-sa-regarding-tap-water-pollution-lanzhou (Accessed April 2, 2015)
vii
Ibid.
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Polaris Institute and the Canadian Union of Public Employees, “Public Risks, Private Profits: Veolia Environnement, Profles of Canada’s
public-private partnership industry, June 2014, p. 14 http://cupe.ca/sites/cupe/files/veolia_e.pdf (Accessed April 2, 2015)
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Veolia 2013, pp. 30-31.
x
Polaris, p. 14.
xi
David Hall, Violeta Corral, Emanuele Lobina, and Robin de la Motte, “Water privatisation and restructuring in Asia-Pacific”, December
2004 (with minor corrections January 2005), London: Public Services International Research Unit, p. 8.
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Ibid, p. 9.
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Corporate Accountability International, “ Behind the World Bank’s Spin: Private Water Failures in Manila and Nagpur”, November 2014,
pp.8-9.
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Anjaya Anparthi, Two-thirds of Nagpur’s water supply lost, NMC remains clueless, May 20, 2014
http://timesofindia.indiatimes.com/city/nagpur/Two-thirds-of-Nagpurs-water-supply-lost-NMC-remains-clueless/articleshow/35353540.cms
(Accessed April 2, 2014) xv
Yao Lan, “Veolia under fire for water quality in China”, April 21, 214, http://www.ecns.cn/cns-wire/2014/0421/110421.shtml (Accessed April 10, 2015)
xvi
xvii
Globalization Monitor, Open Letter
David Hall, et.al., , p.9.