Peru's Sedapal plans to invest US$5bn through 2021

Friday, October 14, 2016

Lima's state water company Sedapal, which has yet to provide services to 100% of the capital city's 9mn population, plans to invest 16.5bn soles (US$5bn) over the next five years in potable water and sewerage projects, according to CEO Rudecindo Vega.

The company aims to participate in 18 public-private partnership (PPP) projects totaling 5bn soles in investment to boost coverage, said Vega, who was appointed to head Sedapal last month. About 8% of Lima's residents only have running water 16 hours a day and 4% receive the service four hours daily, he added, according to state gazette El Peruano.

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To date, Sedapal has secured 5.5bn soles in financing from the Treasury, loans and PPPs, Vega said. About 4.5bn soles will be raised from sovereign bond sales and another 4.5bn soles from the finance ministry, Vega pointed out.

Sedapal needs to invest about 11 times the 300mn soles per year it has been allocating in recent years, he said, adding that multilateral lenders such as the World Bank, Inter-American Development Bank (IADB) and Japan's JICA are interested in financing projects.

"To meet this goal will involve resizing the company," he was quoted as saying by El Peruano. "We need to focus on the projects and their financing. It needs to be done if we want to help meet the government's commitment to expand water and sewerage services."

Projects include Obras de Cabecera (Marca II), currently being negotiated with the state agency to promote private investment (Proinversión) and water regulator Sunass, and a desalination plant south of Lima, both planned for "the short term," Vega said.

The company, which operates three water treatment plants and buys water from Chillón River concessionaire Consorcio Agua Azul, executed just 72% of its 169mn-sol 1H16 investment program. About 700,000 Lima inhabitants still lack access to potable water and 1mn lack sewerage services, according to Sunass.

Sedapal's 1H16 profit plunged 72.5% to 8.7mn soles as FX losses offset lower costs. Revenue rose 12.8% to 936mn. Sedapal's debt totaled 6.07bn soles through June 30, most of which has been financed by the finance ministry and JICA.

Sedapal has been criticized by industrial groups, such as infrastructure lobbyists AFIN, which alleges the state company is unable to finance its portfolio of potable water and sewerage projects.

Peru's President Pedro-Pablo Kuczynski, who took office July 28, has pledged to install connections for water services for 100% of the population by 2023.