Govt seeks model to incentivize private investment in reservoirs

- Tuesday, December 6, 2011

Govt seeks model to incentivize private investment in reservoirs

The Chilean government is looking for a model that will incentivize private sector investment in the construction and operation of reservoirs, Felipe Martin, executive advisor to the national irrigation authority (CNR), told BNamericas.

The lack of a proper diagnosis of the country's water needs is one of the reasons why private sector involvement in this area has been so weak, according to Martin. A diagnosis has now been completed as part of the national irrigation plan.

CNR carried out studies over 18 months to determine the country's irrigation needs. Chile currently has 1.1Mha under irrigation, and the government aims to increase this by 50% to 1.7Mha.

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The national irrigation plan also includes the prioritization of six reservoirs by the year 2022. President Sebastián Piñera has said work on four of them, costing over US$200mn, will begin during his term in office.

"We're working on the tools that will increase private sector investment," Martin said, adding that a concessions model could be an option.

Irrigation dams and reservoirs in Chile are currently built as public works projects under law DFL 1123, or as concessions.

Reservoirs are built with public funds and operated by the state for four years, after which operation and maintenance costs are transferred to irrigation user organizations. However, some works are never transferred, meaning the state continues to pay for their operation.

Chile's only experience with privately operated irrigation reservoirs was phase II of region VI's Convento Viejo reservoir, which the public works ministry (MOP) has called an unsuccessful initiative.

The reservoir was built and is now operated by concessionaire Besalco, but third-stage works to build a 300km irrigation network were never completed.