Consortium seeks compensation for canceled Monterrey water pipeline

Consortium Aquos Promotora de Infraestructura is seeking 140mn Mexican pesos (US$7.7mn) in compensation for the cancellation of its 30-year contract to build and operate the Monterrey VI water pipeline in Nuevo León state.

The five-company consortium led by a subsidiary of Mexican construction firm ICA, and including Concretos y Obra Civil del Pacífico, a unit of Grupo Higa, says the amount is equivalent to the expenses it incurred in planning the project and carrying out studies.

Aquos will show invoices as proof to support its claim during an upcoming arbitration hearing with Monterrey city's water utility SADM, according to local daily El Financiero.

The amount is 10 times the maximum that SADM is proposing to pay.

"In regard to the termination of the contract, which the Nuevo León government decided unilaterally, we are aiming to recover the money we have invested in preparing the bid, carrying out the preliminary studies, works related to securing easements, preliminary engineering and environmental impact studies, among others," Humberto Armenta, chairman of Monterrey-based company Recsa – one of the consortium members – is quoted as saying.

The public-private partnership contract for the project was awarded to the consortium in 2014. The group was the only bidder to make an offer in the tender process, as another consortium led by Abengoa was disqualified following the submission of technical proposals.

The initiative entailed building a 372km pipeline to draw water from the Pánuco river basin in neighboring San Luis Potosí state to supply Monterrey, one of Mexico's largest cities. Construction came in for criticism because of claims of cost overruns, as well as the environmental impact it could have on flora and fauna.

The project's price tag was originally estimated at 14.2bn pesos, with national infrastructure fund Fonadin contributing 3.08bn and the winning bidder and a syndicated loan providing the rest.

Nuevo León state governor Jaime Rodríguez decided to cancel the project last year claiming, among other things, that the actual amount would have been 60bn pesos.

The contract was officially terminated in May.