Press release - December 11th, 2016
The municipality of Mafra, which was the first municipality to privatize water and sanitation services in Portugal, makes it precisely 22 years ago, decided on last 9th od december, unanimously, to terminate the concession agreement with Be Water.
The decision was taken after the private operator submitted a request for tariff increases of 30 percent, which was considered "unacceptable,", said the municipality in a statement.
In order to carry out the redemption of the concession, the municipality promoted an economic-financial and legal study, concluding that full municipal management of services will reduce tariffs by up to five percent, and therefore, instead of a worsening, domestic consumers may benefit from a reduction in the water prices.
However, according to data from the study quoted in the press, the termination of the concession contract could imply an expense of up to 11.6 million euros to compensate the concessionaire, in addition to investments in the renovation and expansion of the municipal water and sanitation network, evaluated at around 13 million euros.
The municipality also states that all employees of the concessionaire will be transferred to the future managing entity of the service, which will be 100% municipal, stressing that the service will always be guaranteed with the highest quality.
Better safe than sorry
STAL warmly welcomes the decision of the municipality of Mafra, considering it particularly symbolic that this remunicipalization takes place in the same municipality and by the same political force (PSD), which inaugurated the process of water privatization in Portugal.
The reversal of the concession undermines the perceived superiority of private management and confirms the true nature of the privatization: the private pockets of heavy profits, the municipalities and the population pay the bill.
It further confirms that, in order to avoid the enormous risks of privatization and the payment of millionaire damages, these essential services should never have left the public sphere.
STAL considers that conditions should be created to facilitate the re-municipalization of privatized services by canceling abusive contracts already declared illegal by the Court of Auditors.
It also points out that there are several legislative instruments in the Assembly of the Republic, such as Law 335/XIII/2, "Protection of individual and common rights for water", as a result of the citizens' initiative promoted by the "Água é de todos" campaign.
Stop privatization in Vila Real de Santo António
Lastly, STAL expects that the majority PSD of Vila Real de Santo António, which intends to privatize/concession water and sanitation services, will take due account of the example of Mafra, reconsider and consider the serious risks that privatization decision implies.
As the tender documents show, the tariffs will suffer real increases in the order of five percent in the first year of the concession; 15 percent in the third year, 12 percent in the fifth year, and ten percent in the seventh year. These increases will always be increased by inflation.
In addition, the contract provides a guaranteed profit rate of 13.43 percent to the private operator.
The population and the workers of the municipality of Vila Real de Santo António thus have reasons to reaffirm their opposition to the privatization of water and sanitation services.