Water services

1
Water services

• The German market

Business Development Marco Gyurasits RWE Aqua GmbH
Brussels, 15th July 2003
2
Introduction
3
Characteristics of the German water market

• There is significantly more political discussion
  around the privatisation of market
• Increased liquidity problems of municipal
  households
• Market share of private companies has risen
  during the last years
• Mounting pressure to increase the efficiency of
  water companies

4
Tariff determination in Germany

• German water companies and municipalities are
  autonomous in their price calculation. A state
  price regulator or a control authority do not
  exist.
• The price calculation is subject to different
  legal provisions such as Kommunalabgabenrecht
  (KAG) (regulation of municipal charges and
  levies), öffentliches Preisrecht (public
  pricing law), civil code (315 BGB) and Gesetz
  gegen Wettbewerbsbeschränkungen (GWB) (law
  against restraints of trade).
• A possible juridical verification of a price
  calculation would be based on these legal
  provisions, which are characterised by two
  different principles
• Cost plus principle - in the regulation of
  municipal charges and levies and in the public
  pricing law
• Comparable price principle - in the civil code
  and in the law against restraints of trade.
  

5
Legal framework Clean Water services

• Legal framework given by the state law
  Wasserhaushaltsgesetz (WHG), federal states are
  responsible for the execution and definition of
  the Landeswassergesetze (LWG)
• Permissions for abstraction of ground- or surface
  waters are given by the federal state authorities
  
• Municipalities are responsible for the water
  management within the cities or towns
• Municipalities have the right to manage the water
  services by themselves or to give a concession to
  private companies
• In case of concessions the assets are normally
  owned by private companies and the municipality
  has the right to buy back the assets after the
  concession period (normally 20 - 40 years)
• To procure concessions it is not necessary to
  place a public tender
• One operator per concession area i.e. no
  cross-municipal water distribution
• Water services are subject to normal taxation
  with a reduced VAT rate of 7

6
Type of enterprises in the German clean water
market
Trend to privatise and de-fragmentize the German
water market will continue over the next decade
7
Legal framework for wastewater services in Germany

• According to 18 WHG municipalities are obliged
  to dispose the sewerage water
• Under most federal state laws concessions for
  waste water services are not allowed
• Municipal wastewater services are under sovereign
  rights in contradiction to clean water services
• Undertakings under sovereign right are generally
  not taxable
• Distortion of competition due to different
  taxation treatment between municipal and private
  undertakings

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Type of enterprise in the German wastewater market
Status 1997
Special Purpose Associations
others
8
4
Municpal undertakings
30
Municipally owned companies
44
Public Corporations
14
Slow trend to privatise the German wastewater
market due to legal provisions
9
Private operators in the German clean and waste
water market
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Sundries

• Industrial water consumers
• Usually connected to the municipal network
• Long distances cause quality problems
• High operating expenses (especially power costs)
• High expenses for the permanent and sustainable
  supply security
• Special tariffs for undertakings depending on
  water consumption
• Water wholesale
• In Germany there is no water wholesale trading
  (water is not a commodity, quality problems)